Markets bounce as Bush backs Greenspan for fresh term at Fed

Alan Greenspan looks set to be running US monetary policy until after the coming presidential election.

George Bush indicated he would support the veteran central banker for reappointment as chairman of the Federal Reserve after his fourth term expires next year when the President will face the voters.

The financial markets, which had been worried about a change in leadership at the central bank at a time of economic and political uncertainty, hailed the decision.

The news boosted the dollar, which had earlier tumbled below $1.10 against the euro for the first time since before the war in Iraq.

On Wall Street the Dow Jones Industrial Average climbed 156 points to close at 8484.99.

If the Senate approves the reappointment it will mean he will continue as chairman until January 2006 when age limits force him to step down.

Economists at the analysis firm 4Cast said: "Keeping Greenspan in office until then will be a support for the markets until after the next election.".

A campaign had been building among conservative Republicans to block a new term after Mr Greenspan told Congress any new round of tax cuts needed to be paid for, a position that hurt White House efforts to sell its $726bn (£464m) tax-cut package.

The White House said Mr Bush backed the reappointment of Mr Greenspan, who recently turned 77. The President praised his performance, saying: "I think Greenspan should get another term."

After 15 years at the helm of the world's most powerful central bank, Mr Greenspan enjoys legendary status for his role in guiding US monetary policy.

Despite criticism for failing to popthe dot.com bubble of the 1990s, he has earned praise for his handling of the 2001 recession and the shocks that followed.

The Federal Reserve's next meeting to discuss interest rate policy is on 6 May, which Mr Greenspan is expected to attend.