With the economy seemingly improving, there's been a lot of talk this year about "Fexit" — when the Fed will begin to exit some of the aggressive stimulative actions that it's undertaken in the wake of the financial crisis.

Currently the Fed is engaged in two big actions designed to ease monetary conditions.

One is QE-unlimited, a promise to buy assets every month until conditions improve.

The other big idea is an exercise in expectations management, which stipulates that rates will remain at least until unemployment falls to 6.5 percent, and then probably even a bit beyond that.

It's likely that QE will be undone first, and some expect that QE might be withdrawn sometime this year.

On Friday night after the market closed, Ben Bernanke gave a great speech on long-term interest rates that got at this question.

We already discussed the first half of the speech, wherein Bernanke gives an economics lesson explaining why long-term interest rates in the U.S. are so low.

In terms of actual market moving stuff, the second half where Bernanke discusses his interest rate outlook, and his stance on policy, is probably more important.

At the end, he drops a fat hint about how he sees the economy right now, and what the Fed should do.

In light of the moderate pace of the recovery and the continued high level of economic slack, dialing back accommodation with the goal of deterring excessive risk-taking in some areas poses its own risks to growth, price stability, and, ultimately, financial stability. Indeed, as I noted, a premature removal of accommodation could, by slowing the economy, perversely serve to extend the period of low long-term rates.

In a note titled "Bernanke Stays Long," BofA's Michael Hanson sees this as a clear indication that the gas pedal will remain pressed down for a while.

In our view, his speech re-affirms that the Fed leadership and the majority of FOMC voters will continue with QE3 purchases well into next year.

Punchbowl: Maintained.

For more on the speech, see here >