President Bush has chosen Ben Bernanke, a White House economic adviser, to replace Alan Greenspan as chairman of America’s Federal Reserve, the US equivalent of the Bank of England.

Mr Bernanke is 51 years old and worked at Princeton University for 17 years before joining the Federal Reserve in 2002. He became a White House economic adviser earlier this year.

Mr Bernanke, while likely to take a different approach to Mr Greenspan on tackling inflation, is seen by analysts as a safe choice of world’s most powerful central banker after the criticisms of Harriet Miers as Supreme Court nominee.

Mr Greenspan is 79 years old and due to retire finally on January 31 next year after no fewer than 18 years at the head of the world’s most powerful financial institution.

The key policy difference between Mr Bernanke and Mr Greenspan is over inflation. Mr Greenspan made a virtue out of not tackling inflation for inflation’s sake and allowing human judgment on economic growth to take precedence over an arbitrary cut off on rising inflation to precipitate interest rate changes. Mr Bernanke is much more likely to sanction automatic action based on a certain pre-set level of inflation.

Mr Greenspan became hugely respected over his 18 year tenure for “flattening” the economic cycle by careful management of the economy through cautious quarter point interest rate changes which over the years gradually helped to reduce American, if not world, booms and busts.

Observers, however, agreed that Mr Bernanke was a welcome choice, known and respected by the financial markets. Bond prices rose as the Bernanke appointment leaked out although the dollar remained largely unchanged.

The three “men most likely” to be Fed chairman were Glenn Hubbard, a former adviser to President Bush; Martin Feldstein, a Harvard economist; and Mr Bernanke.

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