United States Federal Reserve chairman Ben Bernanke on Monday said the central bank will keep a close eye on the sliding US dollar even as he pledged anew to keep interest rates at record lows to nurture the economic recovery.

In remarks to the Economic Club of New York, Bernanke engaged in a delicate dance.

He made clear Fed policymakers will keep rates at super-low levels. Yet, through his words, Bernanke is also trying to bolster confidence in the dollar without actually raising rates, a move that could short-circuit the fragile recovery.

Economists say a free fall in the value of the dollar is remote but can't be entirely dismissed.

Although low interest rates can put additional downward pressure on the dollar, they are needed to encourage American consumers and businesses to spend more and fuel the economic turnaround.

"We are attentive to the implications of changes in the value of the dollar," Bernanke said in rare remarks about the greenback. The Fed, he said, will continue to "monitor these developments closely."

Although commodity prices - such as oil - have risen lately, that pickup likely reflects a revival in global economic activity and the recent depreciation of the dollar, Bernanke said. Even so, the Fed chief predicted inflation probably will remain "subdued for some time".

That gives the Fed leeway to hold rates at record-low levels, he said. Economists expect the Fed will hold rates near zero at its next meeting on December 15-16 and into part of next year to help the recovery gain traction.

Weak job market

Bernanke predicted the economy should continue to grow next year, but he warned of "important headwinds" that will restrain the recovery, including a weak job market and tight credit for small businesses and households.

Those forces "likely will prevent the expansion from being as robust as we would hope," he said.

After a record four straight losing quarters, the economy started to grow again in the July-September period at a pace of 3.5 per cent. Government-supported spending on homes and cars drove the rebound, raising questions about the staying power of the recovery once that assistance fades.

Bernanke said the rebound reflected more than "purely temporary factors" and predicted growth would continue into next year.

Future setbacks

But, he cautioned there is uncertainty about how the economy will evolve next year, and warned that "future setbacks are possible".

One of the biggest threats hanging over the recovery is rising unemployment.

The US unemployment rate bolted to 10.2 per cent in October.

It marked just the second time in the post-World War II period that the jobless rate topped 10 per cent.

Some economists think it could rise as high as 11 per cent by the middle of next year before starting to gradually drift down.

Bernanke said the unemployment rate "likely will decline only slowly" if economic growth remains "moderate" as he expects.