Ben Bernanke is a safe choice for Fed Chair. The names on his degrees are from all the right places. He is a respected monetary economist, former Fed governor, and currently chairman of President Bush’s Council of Economic Advisors. He is the best monetary economist who was thought to be on the short list of candidates and was an unusually high-profile Fed governor. But he has little policy-making experience and has only just moved to the White House. Volcker and Greenspan, the last two fed chairs were not stellar academics. However, they had both been steeped in Washington policy-making and practical economic analysis for years before their appointment.

Thankfully, Bernanke was not the first choice of ardent supporters of supply-side economists, who favor tax cuts and tight monetary policy as the best way to strengthen the economy. The next few years are likely to be filled with crises. Given the size of our imbalances including: the current account deficit, the overvalued housing market, and the overextended consumer. Volcker has said there is a 75% chance of a crisis in the next few years. As American monetary policy strategy is less transparent and more personalized than in many other modern economies, we can only hope that Bernanke will live up to the challenge. Greenspan has guided the Fed with no explicit inflation target, being famously skeptical of academic models. We can only hope that Bernake will keep inflation low- a tricky proposition. Inflation expectations are rising, and no one is sure how far interest rates will need to rise along with that. He may well need to be relatively aggressive, to bolster and cement his role as an inflation-fighter.

Also, and this is true of anyone who would have been appointed, he will have less sway over regional bank presidents. As The Economist points out, in the 65 Federal Open Market Committee meetings since 1998 there have been only 15 dissenting votes. Although all participants get a chance to speak their minds, the meetings are hardly an academic debate. That simply will not be true of the new Chair.

Bernanke had what many of those on the outside wanted: “a world-class reputation among economists; credibility on Wall Street; a confidence and an air of political independence that seemed free from hints of cronyism.”

Also, to get an idea of the fun difficulties ahead:

Succeeding Mr. Greenspan, sometimes called the most successful central banker ever, would not be easy under any circumstances. But the timing of his departure could add an extra degree of difficulty to Mr. Bernanke’s ascendancy.

Mr. Greenspan is scheduled to preside over three more meetings of the Fed committee that sets the benchmark short-term interest rate before he retires at the end of January. Based on the price of a futures contract tied to Fed policy, investors are expecting three more rate increases, pushing the target rate to 4.5 percent from the current 3.75 percent, before the Fed pauses or stops altogether.

But that could leave Mr. Bernanke facing a quandary as he takes over at the March 28 meeting. At exactly the moment he is trying to establish himself as an inflation fighter and his independence from the Bush administration, Mr. Bernanke – if he endorses the pause in raising interest rates that many in the markets expect – could appear to be moving in the opposite direction.

All and all, this is a very good choice as he is someone very smart, ideologically pragmatic, with intellectual and academic rigor but also policy savvy and experienced. Bernanke can succeed but markets will be extremely watchful of every single word that he will utter. While being a Republican, he is not a partisan hack or too closely associated with the White House and Republicans and I honestly think he will do a good job.