"Monetary policy works largely through indirect channels - in particular, by influencing private-sector expectations and thus long-term interest rates ... failing to communicate with the public does not create genuine policy flexibility but only reduces the potency and predictability of the effects of given policy actions." Of, course, this approach may eventually make monetary policy rather dull but, in the words of Mervyn King, Mr Bernanke's former academic colleague, "our belief is that boring is best". He will almost certainly encourage a collective effort from Fed members, governors and others, to get a consistent and transparent message across to the markets. For the time being, though, Mr Bernanke will rely on the strength of the Federal Reserve as an institution, rather than on Greenspan-style demagoguery. Mr Bernanke knows full well that the markets have placed Greenspan on a pedestal which is necessarily out of reach for mere central banking mortals Perhaps Mr Bernanke will, in time, scale the same heights.

Despite Mr Greenspan's colossal reputation, I have my doubts that his approach will survive his departure: by giving the impression that all risks can be contained through his own wizardry, Mr Greenspan may have encouraged excessive risk-taking, most obviously with the equity bubble in the late 1990s and, more recently, with the emergence of a housing bubble. Alan Greenspan has, in many ways, been the antithesis of a modern central banker: a man with his finger constantly on the economic pulse, changing his mind on policy in line with the latest set of economic risks, with less reliance than most on a formalised decision-making process. If there is a maverick at the Federal Reserve - albeit a mostly benign one - he's quite a lot older than Mr Bernanke and planning to retire at the end of January. suggests that the neutral funds rate may be somewhat lower today than it was in the past." That some people have tried to portray Mr Bernanke as a dangerous maverick is a reflection of their own misunderstanding of the monetary policy process, not a sign of Mr Bernanke's lack of qualifications. the fact that far future short-term interest rates have recently declined [in other words, that long-term interest rates have been lower than the Fed expected] ... Moreover, Mr Bernanke has little time for those who think that there is some clearly-defined neutral interest rate that the Fed is constantly striving to reach: "It is not helpful, in my view, to imagine the existence of some fixed target for the funds rate toward which policy should inexorably march ... In his eyes, central bankers should, for the most part, pursue a policy of gradualism, fully aware that the road ahead is uncertain.

But it would na? to suggest that Mr Bernanke is about to subject the American economy to a sudden dose of monetary cold turkey. Core inflation in the US is right at the top of this range, suggesting that earlier fears of deflation may, indeed, have been replaced by significant fears of excessive inflation. If so, the chart shows that, at the moment, Mr Bernanke might be suffering from what Sir Alex Ferguson would describe as "squeaky-bum time". Mr Bernanke has suggested that inflation should, ideally, lie within " what I think of as the "comfort zone" of 1 to 2 per cent". The Bank has an inflation target, it publishes a quarterly Inflation Report, the public understand, at least intuitively, what the Bank is aiming to do, and the Bank is under obligation to write an letter of explanation to the Chancellor of the Exchequer should actual inflation stray too far from the target. A good example of this approach is the arrangements that currently exist at the Bank of England. for example, the central banker may feel compelled to tighten monetary policy more aggressively than is warranted in order to convince the public of his determination to fight inflation." For these reasons, and more, Mr Bernanke is a great believer in what he describes as an "explicit, well-designed, and transparent framework for monetary policy, one which sets forth the objectives of policy and holds central bankers accountable for reaching those objectives (or, at least, for providing a detailed and plausible explanation of why the objectives were missed)".