Bernanke Vows to Continue Greenspan Policies
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He's a tough act to follow, but the man tapped to replace Alan Greenspan was on Capitol Hill today. Ben Bernanke went before the Senate Finance Committee, which has to approve his nomination to head the Federal Reserve. Bernanke said he was committed to both price stability and economic growth, and he reiterated his desire to have the Fed start telling the public exactly what inflation rate it's going for. NPR's Jim Zarroli has that story.
JIM ZARROLI reporting:
Bernanke is a mild-mannered, bearded academic who might actually lose to Alan Greenspan in a charisma contest. Speaking to the committee, he thanked President Bush for appointing him, but also said he would perform his duties in a non-partisan manner.
Mr. BEN BERNANKE (Federal Reserve Chairman Nominee): I assure this committee that if I am confirmed, I will be strictly independent of all political influences and will be guided solely by the Federal Reserve's mandate from Congress and by the public interest.
ZARROLI: Bernanke stressed that he would continue the policies of the Greenspan Fed. He said in recent years, recessions have become less frequent and less severe, and the labor market has become more stable.
Mr. BERNANKE: I believe that the Federal Reserve's success in reducing and stabilizing inflation and inflation expectations is a major reason for this improved economic performance.
ZARROLI: He said the fact that the financial markets have confidence in the Fed's commitment to inflation-fighting is one reason that this year's energy price spikes haven't hurt the economy more. But Bernanke also said the Greenspan Fed has shown a willingness to be flexible and entertain new ideas when necessary. Among other things, it has become much more transparent about how decisions are made, a policy he said he hopes to continue. And one possible step in that direction would be to state explicitly the range of inflation rates Fed officials will tolerate, a practice known as inflation-targeting. Bernanke said the targets shouldn't be applied rigidly; the point is simply to give the markets a better sense of what's guiding interest rate policy.
Mr. BERNANKE: I would certainly not try to return inflation to a target within a short period of time. I would simply try to assure the markets that--over a long period of time, that the Federal Reserve was committed to price stability as a central point of its monetary strategy.
ZARROLI: If publicly setting an inflation target helps keep prices under control, Bernanke said, it will be good for the economy and promote job growth. Democratic Senator Paul Sarbanes of Maryland noted that the policy was used in countries that have weaker economies than the United States.
Senator PAUL SARBANES (Democrat, Maryland): If inflation-targeting has worked so poorly in Europe compared to our performance, why should we go down that path here?
ZARROLI: Bernanke replied that European economies are suffering for reasons that have nothing to do with inflation-targeting, like an inflexible job market. But Bernanke repeatedly tried to send a message that he was anything but a radical. He said he would only use inflation-targeting if a consensus existed at the Fed that it was a good idea. And he said his concern for price stability would in no way overshadow the Fed's other mandate, which is to pursue policies that promote full employment. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.