Central Bank

Washington -- President Bush named Ben Bernanke, head of his Council of Economic Advisers, yesterday to succeed Alan Greenspan as chairman of the Federal Reserve. If confirmed, Bernanke, 51, a former Fed member, will have big economic challenges ahead - perhaps even bigger than those Greenspan has encountered. Greenspan, 79, who earned credibility and star-like status in handling stock market crashes, international financial crises, inflation, and booms and busts in more than 18 years as the Fed's chairman, is retiring in January.

For investors who worry about rising interest rates, what comes next may well be the tough part. Despite 11 increases in short-term rates in just over 15 months, Federal Reserve members are indicating there will be no quick end to their campaign to tighten credit. Don't be surprised if the central bank makes at least two more interest-rate moves before Fed Chairman Alan Greenspan departs in late January, which would bring its short-term lending barometer to 4.25 percent, said Bannockburn, Ill.-based mutual fund manager Henry Van der Eb. Other economists say the rate could hit 5.5 percent next year.

ROME -- The head of Italy's Central Bank had flown all the way to Washington for World Bank meetings when he learned that his government had stripped him of the authority to represent it. He had to cut his trip short and fly home. Even that indignity was not enough to force Antonio Fazio to quit. At the center of a banking scandal that has embarrassed Italy in international finance circles and hurt Prime Minister Silvio Berlusconi politically, Fazio showed no signs yesterday of stepping down.

The Federal Reserve chose inflation-fighting over public relations yesterday, raising its benchmark short-term interest rate by another quarter-point to 3.75 percent against suggestions that it pause in deference to Hurricane Katrina. The 9-1 vote to raise the federal funds target rate by another quarter percentage point to puts the key interest rate at its highest level since August 2001. In response to the Fed's action, commercial banks began raising their prime lending rates by a corresponding amount, to 6.75 percent.

To pause or not to pause, that is the question facing the Federal Reserve today. For 10 straight meetings, Chairman Alan Greenspan's central bank has gradually increased short-term interest rates in a campaign to bring them back to a more "neutral," or normal, level. Another increase had been expected before Hurricane Katrina devastated New Orleans and the Gulf Coast - and sent gasoline prices soaring and consumer confidence sinking. But now, the Fed finds itself besieged by pressure to wait until its Nov. 1 meeting before boosting interest rates again.

Federal Reserve Chairman Alan Greenspan reaffirmed yesterday what a growing body of data has made clear: Last spring's soft patch is long gone, as the economy has picked up steam. The Fed chief told the House Financial Services Committee that, despite high energy costs and other concerns, economic growth is on a "firm footing" while inflation remains in check. But the central bank will continue to raise short-term interest rates to keep things that way, he said. "Our baseline outlook for the U.S. economy is one of sustained economic growth and contained inflation pressures," the 79-year-old Greenspan told the committee in one of his last appearances before Congress as Federal Reserve chairman.

WASHINGTON - The Federal Reserve's statements are often more important for what they do not say. And what the Fed did not say yesterday moved the markets. Optimism had abounded in the stock market that the central bank would signal an end to its campaign to gradually boost interest rates to a "neutral rate." No such luck. Instead, the Fed not only raised its benchmark interest rate by another quarter of a percentage point, to 3.25 percent, its ninth such increase in a row, it also said it would continue increasing rates at a "measured" pace, a message that the end is not in sight.

Don't expect any surprises when Federal Reserve policy-makers meet again this week. Many on Wall Street agree that the central bank will raise the federal funds rate another quarter point to 3.25 percent Thursday when they announce the outcome of their two-day meeting. After that, however, all bets are off. That presents something of a conundrum for investors, but there are patterns of stocks that tend to lag or outperform once the Fed stops its series of rate increases. Recent economic data have sent contradictory signals.

BRASILIA, Brazil - Nepotism is good. Homosexuality is bad. Getting pregnant through rape is a "horrible accident." Severino Cavalcanti, the author of these sentiments, is on a roll. When he was an obscure congressman, such public pronouncements might have earned him a passing sneer in a political column. Now that he's one of Brazil's most powerful men, Cavalcanti's controversial declarations have landed him on the front pages of newspapers across the country. The lawmaker has commanded the spotlight since February, when he stunned just about everyone in Brazil by getting elected president of the National Congress.

The Federal Reserve's job only gets tougher from here. Which explains a lot about the recent turmoil in global financial markets. The Fed has been raising its benchmark short-term interest rate since June, when the rate was at a generational low of 1 percent. Everyone knew that was an emergency level for an economy no longer facing an emergency. So a series of six quarter-point rate increases didn't surprise anyone. March 22 brought No. 7, which put the Fed's rate at 2.75 percent. That was no shocker either.