Greenspan ends 18-year Fed rule

WASHINGTON - Central banker Alan Greenspan ended his 18-year term as chairman of the Federal Reserve Board on Tuesday, and marked the event by overseeing another boost in short-term interest rates.

The Fed's policymakers, who meet in private eight times a year to set rates, increased the federal funds rate by another quarter of a percentage point, to 4.5 percent.

The increase was the 14th consecutive one since June 2004.

Some economists interpreted a statement the Fed issued as suggesting it might be nearing the end of Greenspan's campaign to raise interest rates at a "measured" pace to slow economic growth enough to dampen inflation.

After its most recent rate increase Dec. 13, the Fed said more upticks are "likely to be needed" to cool price pressures. This time, it said higher rates "may be needed," suggesting that the Fed might be inclined to raise them only once or twice more.

Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, said the Fed's statement suggests policy makers now believe "they have achieved [inflation] moderation with the rate hikes."

If, later in the year, they see prices shooting up for construction materials and energy, they may resume a series of rate increases, he predicted.

But for the late spring and summer, they likely will use a "wait, watch and see strategy," Dhawan said.

Greenspan's term ended on the same day that the Senate confirmed his successor, economist Ben Bernanke, on a voice vote.

Bernanke, 52, will be sworn into office in a private ceremony at the Fed on Wednesday morning.

Investors and economists expect a smooth transition, with little immediate change in Fed policies.

As he departs the Fed, Greenspan, 79, is being heralded by admirers for his ability to use monetary policy to help prevent deep recessions.

"He has helped to guide the U.S. economy in the face of stock market upheavals, terrorist attacks, and global financial shifts," Senate Budget Committee Chairman Judd Gregg, R-N.H., said in a statement. "Chairman Greenspan's legacy is one of thoughtful analysis and sound monetary policy judgments."

When Greenspan first became chairman, some questioned whether he could live up to the reputation of his respected predecessor, Paul Volcker.

Greenspan not only measured up, but came to be regarded as perhaps the greatest central banker in history.

He began building his reputation for cool-headed action barely two months after winning Senate confirmation in August 1987.

The stock market plunged a record 508 points Oct. 19, leaving investors stunned and frightened.

To reassure them, Greenspan announced the Fed would do whatever was necessary to provide cash to keep the financial markets moving.

In the end, the market crash did little harm to the economy.

Although the Fed is independent from the White House and Congress, Greenspan could be a powerful influence on fiscal policy.

In his frequent congressional testimony, he often gave both Republicans and Democrats heartburn.

For example, despite being a Republican, Greenspan worked well with the Democratic administration of President Clinton, helping influence the policies that turned federal budget deficits into surpluses.

Some Republicans are still angry with Greenspan for not doing more to help President George H.W. Bush get re-elected in 1992.

But the complaints started coming from Democrats after 2001, when George W. Bush became president.

Many Democrats say Greenspan went too far in helping Bush by suggesting his tax cuts were needed to stimulate the economy.

When he testified before Congress, Greenspan was known for leaving his audience confused by his unusual syntax and complex ideas. He once famously warned: "If I turn out to be particularly clear, you've probably misunderstood what I've said."

To commemorate Greenspan's last day on the job, the Fed allowed photographers and TV camera crews to photograph - for the first time - a portion of the policymakers' meeting.

And the die-hard sports fan got a baseball glove on his last day, along with a standing ovation.

He was presented with an old-fashioned baseball glove signed by the bank presidents. He also was given his board chair with his name engraved on a brass plaque, and the flag that flew over the central bank's headquarters.