BLOOMINGTON - Like his predecessors, new Federal Reserve Chairman Ben Bernanke needs to keep a close eye on the cost of bread.
That means he'll likely raise interest rates at least one more time to keep a lid on inflation, said Michael Seeborg, a professor of economics at Illinois Wesleyan University.
"Pushing the interest rate up restricts credit, slows down spending and increases the money supply (for future spending and lending)," Seeborg said. "What people worry about is: It could cause unemployment."
Bernanke was sworn in Monday, replacing Fed chairman Alan Greenspan, who amassed a strong reputation as the nation's economic leader for more than 18 years. Bernanke's decisions will affect all things financial - from energy costs and interest rates to credit availability and real estate.
"The chairman of the Federal Reserve Board is probably the second most powerful person in the United States, in the world, really, next to the president," Seeborg said.
In the long term, Bernanke likely will address a potential burst in the real estate bubble, a segment of the economy that may not be able to maintain such steady growth, Seeborg said.
He also could play a key role in President Bush's spending plans on issues ranging from health care to the war. The growing federal deficit also is becoming a huge problem, Seeborg said.
"It'll be interesting to see what Bernanke has to say in that debate," he said.
In the meantime, however, Bernanke is expected to follow the trail left by Greenspan and avoid disrupting the stock market, said some Twin City financial professionals.
"Alan Greenspan and (his predecessor) Paul Volcker, they seem to have made their reputation by controlling inflation. (Bernanke) seems like he's probably going to follow the same general pattern," said Don Fernandes, a financial consultant with AG Edwards in Bloomington.
Greenspan often increased interest rates to slow down inflation or lower interest rates to boost the economy.
Because of his success, Bernanke's swearing-in ceremony could be the biggest news out of the reserve office for awhile, added Linda Kimber Weber, an investment representative with Edward Jones in Normal.
"I'm not looking for anything that's going to be terribly newsworthy from him," Kimber Weber said. "He's got a long time to establish himself."