Bernanke sees Fed mandate for jobs, stable prices

Ben Bernanke, President George W. Bush's pick to succeed Alan Greenspan at the Federal Reserve, vowed on Tuesday to seek both price stability and full employment should the Senate confirm him for the job - confronting Washington and Wall Street concerns.
At a hearing of the Senate Banking Committee on his nomination as Fed chairman, the White House economic adviser pledged to be independent of politics and expressed confidence in the economy's vigor despite recent hurricanes.
Bernanke also tackled head-on the question of adopting a numerical inflation goal at the Fed, restating his long-held conviction that this would benefit monetary policy while promising not to rush into change.
"I view the explicit statement of a long-run inflation objective as fully consistent with the Federal Reserve's current policy approach, including its appropriate emphasis on the role of judgement and flexibility in policy-making," the former Princeton professor said.
"Most important, this step would in no way reduce the importance of maximum employment as a policy goal."
Still, Bernanke said a move to an inflation target would require extensive consultations and broad support.
"I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority," he said, echoing a reassurance he offered last month when Bush tapped him for the job.
Some lawmakers have fretted an inflation target could lead the Fed to focus too much on price stability to the detriment of its other congressionally mandated goal - full employment.
Bernanke argued, however, that price stability was the best route to a healthy job market.
"I will maintain the focus on long-term price stability as monetary policy's greatest contribution to general economic prosperity and maximum employment," he said.
ALMOST GREENSPAN Bernanke, who served on the Fed's board for nearly three years before moving to the White House in June, said monetary policy required the kind of judicious approach Greenspan used, with or without a stated inflation goal.
"Monetary policy is most effective when it is coherent, consistent and predictable as possible, while at all times leaving full scope for flexibility and the use of judgment."
While carefully allying himself with the monetary policy practices of the Greenspan Fed, Bernanke made clear he would not follow his predecessor when it came to weighing in on policy debates outside his "realm of authority."
"What I would like to do is to refrain from making recommendations on specific matters of taxes and spending," he said.
The 79-year-old Greenspan, the second-longest serving chairman in the Fed's nearly 92-year history, has often been criticised for offering advice on fiscal policy and other political issues outside the Fed's purview.
Bernanke's emphasis on price stability and continuity soothed the bond market and US government debt prices rose.