Chairman Ben Bernanke says markets are more stable now that investors better understand the Federal Reserve's guidance on when it might start reducing its bond purchases.

"I think the markets are beginning to understand our message," he said at a House Financial Services hearing.

He said it was important to provide a road map of the Fed's possible moves so that investors don't expect the bond purchases to continue indefinitely.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

Last month stocks plunged after Bernanke said the Fed could reduce its $85 billion in bond purchases later this year if the economy improves.

But stocks have since recovered after Bernanke and other Fed members have made clear that any change depends on the economy's performance, not a target date.

On Wednesday Bernanke told lawmakers the Fed's timetable is not on a "preset course."

Bernanke says it's important to provide guidance on the Fed's possible moves so that investors don't expect the purchases to continue indefinitely.

Paul Dales, senior U.S. economist for Capital Economics, said Bernanke's remarks did not alter his view that the Fed would likely start reducing its bond purchases in September and end them completely by the middle of next year. But Dales said that would be contingent on how the economy's health.

"We don't think this forward guidance could be much clearer," Dales said.

Bernanke's remarks were his latest attempt to calm markets, which have gyrated wildly since the Fed's June meeting.

The Dow Jones Industrial Average plunged 560 points after Bernanke first indicated at the post-meeting news conference on June 19 that the Fed could slow the bond purchases later this year.

Since then, various Fed officials have tried to assure investors that any reduction would be based on stronger growth and improvement in the job market — not a target date. That helped restore investor confidence and the Dow and other market indicators have climbed to new highs.

The job market has improved since the Fed's bond buying began. Employers have created an average of 202,000 jobs a month this year, up from 180,000 in the previous six months.

Still, unemployment remains elevated at 7.6 percent. And economic growth has been modest the past three quarters.

In his testimony, Bernanke again said "a highly accommodative monetary policy will remain appropriate for the foreseeable future" because unemployment remains high and inflation is below the Fed's target of 2 percent.

Bernanke also repeated that the Fed plans to keep its benchmark short-term interest rate near zero as long as unemployment is above 6.5 percent. But Bernanke said the Fed could hold the rate lower even after it falls below 6.5 percent, particularly if unemployment falls because more people are leaving the workforce. The government counts people as unemployed only if they are actively looking for a job.

Bernanke said the economy is growing at "moderate pace" despite the adverse effects of tax increases and federal spending cuts. He noted that the housing market is rebounding and the job market has gradually improved.

"Despite these gains, the job situation is far from satisfactory," he said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You