Leaks of Mr Bernanke’s impending nomination yesterday afternoon were immediately greeted by a reassuring vote of confidence as shares leapt on Wall Street.

Yet while this reaction may be comforting to the new Fed Chairman-designate, precedents suggest that Mr Bernanke should brace himself for potential turbulence. The transition to a new Fed chief has frequently been accompanied by unusual turmoil in bond, share and currency markets.

By the turn of the year, markets could grow increasingly edgy over the replacement of Mr Greenspan’s reassuring, if generally downcast, presence.

This is the first big test that Mr Bernanke will confront — but far from the only, or the greatest, one he faces. As he examines what lies ahead, Mr Bernanke will be able to divide the challenges that he must now tackle into the immediate and the longer term.

He will at least inherit an economy that is in decent shape, despite fundamental vulnerabilities. The International Monetary Fund, in its latest set of forecasts released last month, projected that the world’s No 1 economy would grow by 3.3 per cent next year, on the heels of a 3.5 per cent expansion this year.

Yet from early next year the Fed’s new Chairman and his colleagues will face the tricky decision of how far to press on with the US central bank’s campaign of interest-rate increases, which it has pursued relentlessly since last June, driving rates from 1 per cent to 3.75 per cent so far.

Thus far, the Fed has struck a hawkish tone, reflecting anxieties over the inflation risks fostered by near-record fuel prices, and has shown little inclination to back away from further tightening of policy in the months ahead.

Mr Bernanke will have to grapple with the issue of how to weigh the inflationary dangers from soaring crude costs against their negative repercussions for US growth — a conundrum only made more fraught by the continuing consequences of Hurricanes Katrina and Rita shown in recent disappointing US data.

Still more intimidating will be having to decide how to address the threat posed by a series of deep-seated imbalances that jeopardise future American prosperity. The most pressing of these is the possibility that past, low interest rates and a housing boom have created a bubble in property prices — a risk played down by Mr Greenspan.

As the IMF noted in September, house-price booms do not necessarily end in crashes, but even a slowdown in key US housing markets, which could be triggered by further increases in American interest rates, could lead to a steep drop in consumer spending growth.

Most daunting of all are the great dangers posed by the vast US deficits on the Government’s budget, household finances, and the current account. Mr Greenspan has repeatedly spoken out against the US budget deficit, which has been driven higher by the combination of heavy spending and tax cuts under President Bush and which stands at more than 3.5 per cent of GDP, despite some improvement.

Household finances, too, are in a perilous state, with the US savings rate at zero as American consumers have resorted to heavy borrowing to carry on spending.

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