Ben Bernanke was sworn in Wednesday to be the 14th chairman of the Federal Reserve, completing an historic changing of the guard at the central bank. Bernanke's first major piece of business is likely to decide what to do next with interest rates.
Many economists are betting that the Fed, which increased rates for a 14th consecutive time on Tuesday, will raise rates one last time at the next meeting on March 28 -- Bernanke's first as Fed chief. Then, the Fed probably will stand pat for perhaps the rest of the year. One of the reasons many analysts believe that the central bank will nudge rates up one last time is a feeling that Bernanke will want to show that he is just as much of an inflation-fighter as his predecessor, Alan Greenspan.
"Bernanke will feel the need to look tough in the fight against inflation and a good way to do that is to raise rates another quarter point," said economist David Jones, head of a Denver-area consulting firm. The oath of office was administered to Bernanke in the Fed's stately board room by vice chairman Roger Ferguson. For his part, Greenspan, who wrapped up 18 1/2 years as Fed chairman on Tuesday, was scheduled to be at work Wednesday as well, at his new job -- running Greenspan Associates, a private economic consulting firm he is setting up in Washington. Private economists gave Greenspan high marks, not only for the successful way he handled the economy during his tenure, but also for the smooth transition he provided for Bernanke. The Fed's goal has been to gradually nudge up the federal funds rate, the interest that banks loan to each other, from 1 percent in 2003, a low going back more than 40 years, to a neutral level where it is neither stimulating nor depressing economic growth. The Fed's action on Tuesday boosted the funds rate one-quarter percentage point to 4.5 percent, the highest it has been in nearly five years.