Morgan Stanley says that the new chairman of the Federal Reserve Board, Ben Bernanke, isn’t likely going to change U.S. monetary policy for the foreseeable future.

“As Fed Chairman, Ben Bernanke will bring competence and continuity to the Fed,” the firm says in a research note. “He is a superb monetary economist and communicator. He shares with other Fed officials the strong commitment to the goals of monetary policy that fit the Fed’s dual mandate prescribed by Congress: Price stability and maximum sustainable growth. And he has the respect of and for the Fed.”

“We think that Bernanke’s appointment has little to no bearing on the policy outlook between now and the end of 2006,” it adds. “Our baseline view is that the Federal funds rate will move gradually to 5% by the end of 2006.”

That’s not to say that there aren’t risks in the changing of the guard at the Fed. Morgan Stanley says there is no doubt that Bernanke lacks Alan Greenspan’s experience, “But so did Alan Greenspan following Paul Volcker”.

It notes that Bernanke is a strong proponent of inflation targeting, “But recognizing that implementing inflation targeting under the Fed’s dual mandate may not be easy, he will go cautiously.”

The firm also points out that he is also a proponent of both gradualism and discretion in policymaking. “Gradualism recognizes that an uncertain world most often means moving in small steps towards a likely policy setting. However, discretion implies that simple rules are not only inadequate to deal with the complex risks confronting policymakers, they may actually produce worse outcomes.”