Oct. 24 (Bloomberg) -- Ben S. Bernanke, chief White House economist and a former Federal Reserve governor, was named by President George W. Bush to succeed Alan Greenspan as Fed chairman.

``Ben Bernanke is the right man to build on the record Alan Greenspan has established,'' Bush said today as the men stood by his side in the Oval Office. The economist, currently chairman of the Council of Economic Advisers, ``commands deep respect in the global financial community.''

Bernanke, 51, said his first task will be to ensure continuity as he replaces the man Bush today called a ``legend.'' The former Princeton professor, who was on the Fed from 2002 until June, may champion the move toward greater openness, possibly including a numeric inflation target, and keep it raising rates to counter rising prices, economists said.

``He will put an emphasis on a more predictable format for Federal Reserve monetary policy,'' said William Ford, former president of the Fed Bank of Atlanta.

Bernanke's first challenges include establishing credibility with investors and Congress and showing that he, like Greenspan, has what it takes to keep the economy on keel during crises. Greenspan, who is 79 and will leave the Fed when his term as governor expires Jan. 31, gave Bernanke his seal of approval.

``The president has made a distinguished appointment in Ben Bernanke,'' Greenspan said today. ``Ben comes with superb academic credentials and important insights into the ways our economy functions.''

First Priority

Bush's decision to tap Bernanke as chief White House economist in June was widely seen as grooming him to replace Greenspan. Bernanke led surveys as both a qualified and likely choice for successor.

``He's got the right pedigree,'' said Ethan Harris, chief U.S. economist for Lehman Brothers Inc. That said, ``you're replacing an icon with a mere mortal, and he's going to have to prove himself in the job.''

Greenspan maneuvered the economy through two stock-market collapses, in 1987 and 2000, and two recessions, in 1990-91 and in 2001. The expansion in between was the longest in history.

``If I am confirmed to this position, my first priority will be to maintain continuity with the policies and policy strategies established during the Greenspan years,'' Bernanke said today.

Confirmation Process

Bush, who has two Fed vacancies left to fill, will become the first president since Ronald Reagan to appoint or reappoint all seven board members. Bush is nominating Bernanke for a 14-year term as governor and a separate four-year term as chairman, and he may help shape the Fed by influencing Bush's picks.

The Fed chairmanship is subject to Senate confirmation. Banking Committee Chairman Richard Shelby, an Alabama Republican, said today he expects Bernanke to be ``well-received by all members of our committee.'' A spokesman for the committee said he expects a hearing before Congress adjourns this year, and Shelby said in an interview that ``we're going to move it as fast as we can and are awaiting the paperwork.''

As a Fed governor for almost three years starting in 2002, Bernanke helped re-charge its research agenda. He reached out to junior staff economists in informal cafeteria seminars and through speeches on communication policies and alternative steps the Fed could use to ward off deflation.

Bernanke must now convince bond markets that he is an inflation fighter. It will be a tough task: None of his predecessors faced markets that move as quickly on instant information as they do today.

Fed Rates

Even as the Fed has lifted the benchmark lending rate 11 times over the past 15 months off the lowest levels in 46 years, inflation, by every measure, has moved higher. Most economists in a Bloomberg News monthly survey predict the rate will rise to 4.5 percent by the end of the first quarter from 3.75 percent now.

U.S. 10-year Treasury notes fell after today's nomination. The yield on the benchmark 10-year note rose 7 basis points, or 0.07 percentage point, to 4.45 percent at 4:20 p.m. in New York.

``The sell-off was not an expression of dissatisfaction with the choice, but merely a reflection of the uncertainty going forward,'' said Bill Gross, chief investment officer at Pacific Investment Management Co. in Newport Beach, California.

U.S. stocks rose, with the Standard & Poor's 500 Stock Index gaining 1.7 percent. Japanese stocks gained, led by exporters, after Bernanke's nomination. The Nikkei 225 Stock Average climbed 1.6 percent at 10:52 a.m. in Tokyo. South Korea's Kospi index rose 0.8 percent at 10:52 a.m. in Seoul. The Morgan Stanley Capital International Asia Pacific Index, which tracks more than 1,000 stocks, added 1.3 percent.

Main Rival

Bernanke today won an endorsement from his main rival for the post, Harvard University professor Martin Feldstein, who finished second when 104 financial professionals were asked last month to name Greenspan's most likely successor. Bernanke got 38 percent of the vote and Feldstein 31 percent in the poll by Stone & McCarthy Research Associates of Princeton, New Jersey.

``I've known Ben for many years,'' Feldstein said today in an interview. ``He has done a great deal of research at the Fed. He will do an excellent job.''

Bernanke is an advocate of setting an inflation target, or specifying a numerical goal for prices. The Federal Open Market Committee debated the strategy as early as February and decided to defer the discussion.

Economists said Bernanke is unlikely to push the idea immediately, in part because both Governors Roger Ferguson Jr. and Donald Kohn are opposed.

``This is obviously an issue on which knowledgeable and reasonable people can disagree,'' former Fed Governor Susan Phillips said in an interview. ``I don't think he will be in a position to move overnight.''

Handling Congress

Bernanke once named his personal range for desirable inflation, as measured by the so-called core personal consumption expenditure price index, which omits food and fuel costs.

A target in the range of 1 to 2 percent a year ``might be a good initial choice,'' he said during his confirmation hearing as a governor on July 18, 2002. By that measure, inflation was at the top of his target for the 12 months ended in August.

Bernanke must also gain credibility among lawmakers. For much of the past decade, Greenspan received praise during his appearances, and congressmen rarely challenged the Fed's policies. Since he started his White House job on June 21, Bernanke has testified twice before Congress and given five speeches on non-controversial subjects.

``We need a careful, non-ideological person who understands that the Federal Reserve's main job is to fight inflation and Ben Bernanke seems to fit that bill,'' Senator Charles Schumer, a New York Democrat, said in a statement.

Bernanke has shown he's agile under questioning from members of Congress, particularly on issues that Democrats support, such as a higher minimum wage.

Fed's Dual Mandate

Asked in May by Maryland Senator Paul Sarbanes, a Democrat, whether he would take back what he wrote in a 1991 textbook that increasing the minimum wage would have only minor economic drawbacks, Bernanke replied: ``No, senator, I've just become more uncertain.''

Bernanke will have to at least express concern about jobs and growth in his nomination hearing, and, if confirmed, during his semi-annual testimony in February. Unlike many of the world's central banks, the Fed has two mandates: stable prices as well as sustained growth that will result in low unemployment.

Delivering on the expansion will be tricky.

Economists expect U.S. growth to slow, even as inflation expectations rise in the aftermath of a 51 percent increase in retail gasoline prices this year. Fed officials have made it clear they intend to keep leaning against inflation by pushing up the federal funds rate, even after Hurricanes Katrina and Rita hurt third-quarter growth prospects.

Selection Process

The president called Bernanke from Air Force One on Oct. 21 to discuss the nomination and offered him the post in the Oval Office about 7:15 a.m. today, spokesman Scott McClellan said in an e-mailed statement.

Bush's nominating committee consulted academics, Wall Street executives, business leaders and lawmakers from both parties in Congress in a search that McClellan said began in late April. The initial list had more than 20 names, and Bush met with the search committee several times and sought advice from Greenspan on the qualifications needed.

The nominating committee included Vice President Dick Cheney; Chief of Staff Andy Card; National Economic Adviser Al Hubbard; Liza Wright, an aide for presidential personnel; and I. Lewis ``Scooter'' Libby, Cheney's chief of staff.

Bernanke graduated summa cum laude from Harvard University in 1975 with a bachelor's degree in economics. He received his doctorate in economics from the Massachusetts Institute of Technology in 1979.

He became a ``star'' teacher at Princeton and will use those personal skills in managing the Fed staff and working with the governors, said Kenneth Rogoff, a professor of economics at Harvard who has known Bernanke for 30 years.

``You are getting a continuation as if Greenspan was there,'' said Rogoff, who also is a former chief economist for the International Monetary Fund. ``He has the confidence to continue Greenspan's policies, but as the world changes, react to those changes as thoughtfully as Greenspan would.''

To contact the reporters on this story: Brendan Murray in Washington at brmurray@bloomberg.net ; Craig Torres in Washington at Ctorres3@bloomberg.net