Federal Reserve Chairman Ben Bernanke on Tuesday said the outlook for the long-suffering U.S. economy appears to be improving and the U.S. central bank was carefully reviewing ways to withdraw its massive monetary policy stimulus when conditions permit.

But Bernanke cautioned that unemployment was likely to remain high into 2011, and he warned that this could sap fragile consumer confidence and potentially undermine what is expected to anyway be a very gradual recovery.

The FOMC believes that a highly accommodative stance of monetary policy will be appropriate for an extended period, Bernanke, referring to the policy-setting Federal Open Market Committee, told U.S. lawmakers in remarks prepared for delivery in semi-annual congressional testimony.

However, we also believe that it is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation, he said.

(Reporting by Mark Felsenthal and Alister Bull, Editing by Andrea Ricci)