In a speech on Monday at the Washington Economic Club, Fed Chairman Ben Bernanke did everything he could to dispel notions of a near term rate increase, which were heightened after last Friday’s NFP report showed a loss of just 11,000 jobs in November.

“We still have some way to go before we can be assured that the recovery will be self-sustaining,” the Fed Chairman said. “My best guess at this point is that we will continue to see modest economic growth next year -sufficient to bring down the unemployment rate, but at a pace slower than we would like.”

After Friday’s report, traders in Fed Funds Futures were betting on a 50 basis point rate increase by June 2010. But those positions were pared after Bernanke said that inflation could move lower.

“The economy confronts some formidable headwinds that seem likely to keep the pace of expansion moderate,” Bernanke said, before repeating the Fed’s statement that rates are likely to remain low for an “extended period” in response to a question after his speech.

Central Banks have been on a mission to “reflate” the global economy for over a year. In March, during an interview on the 60 Minutes television program, Bernanke admitted that the Fed was “electronically” printing dollars in order to purchase the illiquid toxic assets then clogging the books of the nation’s largest commercial banks. The S&P has gained nearly 63% since then as the dollar depreciated against major and emerging market currencies. The net result of Bernanke’s speech is likely to be a continuation of that trend.

In response to a question about the direction of interest rates, Bernanke said: “Right now we are still looking at the extended period given that conditions remain low rates of utilization, subdued inflation trends, and stable long-term inflation expectations.” But the coup de grâce for the dollar was given when he warned that “inflation could move lower from here.”

What this means is that we’re highly unlikely to see the Fed move at all on interest rates in 2010. In fact, we may not even begin to hear the FOMC making anything that resembles hawkish sounds for quite some time to come.

After the 2001 recession (a much less severe downturn than the present situation) ended in November that year, the Fed did not make its first increase until June 2004. The economy lost 384,000 jobs in 2002 and another 361,000 through August 2003. Starting in September, jobs growth began in earnest as the economy saw 9 straight months of jobs creation, which totaled 1,517,000. The Fed then embarked on its run of 17 straight 25 basis point rate increases with the last tightening, which brought the overnight rate to 5.25%, occurring in June 2006.