Federal Reserve Nominee's Difference Is One of Style

The nomination of Ben S. Bernanke by President Bush to become the next Federal Reserve chairman is being framed as a change in style rather than substance, based on how he operated during three years under Alan Greenspan. Analysts cited in the article say Bernanke sided with Greenspan on every interest-rate decision while serving on the Fed board, but that his approach may affect how policy is communicated and managed in crises. One key distinction discussed is whether the Fed should set an explicit public inflation target; Greenspan avoided announced targets to preserve flexibility, while Bernanke has expressed support for inflation targeting. The article notes that in a 2003 Foreign Policy piece, Bernanke argued for a 1% to 2% inflation goal when inflation was near zero, warning that higher inflation could create volatility and that deflation risk could contribute to depression-like outcomes. Since the Fed’s rate increases began in June 2004, analysts say policy has reflected “implicit targeting.” The piece concludes that Bernanke may make targets more public while keeping flexibility, with supporters arguing that transparency can reduce nervousness in stock and bond markets.