Fed raises rate, passes torch

WASHINGTON — Incoming Federal Reserve Chairman Ben Bernanke will have the next word on raising America’s borrowing costs.

As they boosted interest rates to the highest point in nearly five years, retiring chief Alan Greenspan and his Fed colleagues tweaked their policy statement Tuesday to give Bernanke more leeway to do as he sees fit.

“It keeps the door wide open for Bernanke to raise rates again but doesn’t force him over the threshold,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “He has not been backed into any corners. He will have options.”

Fed policy-makers said “some further policy firming may be needed” to keep the economy and inflation on an even keel.

That marked a subtle change from their last meeting in December, when they said “measured policy firming is likely to be needed.”

By dropping the word “measured” and softening the forward-looking language on rates a bit, the Fed was attempting to provide “Bernanke with a clean slate,” said Stephen Stanley, chief economist at RBS Greenwich Capital.

All 14 of the Fed’s rate increases since it began tightening credit nearly two years ago have been by one-quarter of a percentage point.

Shortly after the Fed’s rate announcement, the Senate — showing broad bipartisan support — approved on a voice vote Ben Bernanke’s nomination to be the 14th chairman of the central bank. Bernanke, 52, will be sworn in as Fed chief this morning in a private ceremony at the Fed’s marble headquarters.