WASHINGTON (HedgeWorld.com)–President Bush sent two nominations to the Senate to fill the remaining vacancies on the board of governors of the Federal Reserve, and this may augur a change in the way the Fed approaches monetary policy.
The President’s nominees are: Ben S. Bernanke, currently the chair of the department of economics at Princeton University, and Donald L. Kohn, who has been on the staff of the board of governors since 1975.
Neither of these nominees is known as a strong exponent of views of the Fed’s regulatory responsibilities. Bert Ely, a banking industry consultant, said Monday that Mr. Kohn would likely reflect the Fed’s institutional interest, “protecting its regulatory turf and not going too easy on the banks.”
Both nominees have expressed themselves firmly on core issues of monetary policy. Mr. Bernanke is a prominent advocate of the view that central banks should publicly announce and pursue their specific targets for the rate of inflation. This inflation targeting approach, he contends, leads to greater predictability and an improved climate for steady economic growth. He recommends it over alternative approaches, such as the targeting of money supply numbers or interest rates.