By Ross Colvin and Patricia Zengerle
OAK BLUFFS, Massachusetts (Reuters) - U.S. President Barack Obama nominated Ben Bernanke to a second term as Federal Reserve chairman on Tuesday, aiming for continuity at a time when the U.S. economy is breaking free from a deep recession.
The decision, while widely expected, was welcomed by financial markets and policy makers around the globe. Economists said it removed uncertainty at a delicate juncture in the economy's recovery.
Obama interrupted his vacation on the Massachusetts island of Martha's Vineyard to make the brief announcement with Bernanke, 55, at his side.
"Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall," Obama said.
Bernanke's four-year term expires in January and the president had not been expected to make an announcement until later this year.
Critics said the announcement had been timed to deflect attention from less market-friendly news on the government's budget deficit, but an Obama aide denied this.
"There has been a considerable amount of speculation in the marketplace, both in the market and among observers of the Fed, and going into the fall the president wanted to end that speculation," Austan Goolsbee, a member of the White House Council of Economic Advisers, told Reuters Television.
The White House raised its 10-year cumulative budget deficit projection by $2 trillion on Tuesday to approximately $9 trillion. That would push the national debt up from more than $11 trillion now to more than $20 trillion in 2019.
With polls showing Americans deeply worried about the deficit, the new data will make it more difficult for Obama to push through his ambitious economic and healthcare overhaul.
U.S. stocks were slightly higher in afternoon trading, buoyed by news of Bernanke's nomination and strong housing and consumer confidence data.
OBAMA MADE DECISION LAST MONTH
Before the president began a week-long vacation on Sunday, Obama administration officials repeatedly stressed that he would not be making news.
Analysts said the timing of the announcement was shrewd.
"We entered the financial crisis two years ago with an untested Fed chairman. Bernanke has been through the crucible since then," said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.
"Moving into the clean-up phase with another new and untested chairman would have just compounded the uncertainty in the outlook." Continued...
United States President Barack Obama announced on Tuesday that he is nominating Ben Bernanke for a second term as Chairman of the Federal Reserve, the central bank of the United States.
White House in April.
Obama made the announcement during a brief break from his vacation at Martha's Vineyard in Massachusetts.

"The man next to me, Ben Bernanke, has led the Fed through one of the worst financial crises that this nation and the world has ever faced. As an expert on the causes of the Great Depression, I'm sure Ben never imagined that he would be part of a team responsible for preventing another. But because of his background, his temperament, his courage, and his creativity, that's exactly what he has helped to achieve. And that is why I am re-appointing him to another term as Chairman of the Federal Reserve," the President said.

"Ben approached a financial system on the verge of collapse with calm and wisdom; with bold action and outside-the-box thinking that has helped put the brakes on our economic freefall," Obama added.

"We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable economic and financial environment in which opportunity can again flourish, and in which Americans' hard work and creativity can receive their proper rewards," Ben Bernanke said while accepting the nomination.

Ben Bernanke, who succeeded Alan Greenspan on February 1, 2006, will now face a Senate confirmation hearing.

"There will be a thorough and comprehensive confirmation hearing," said Senator Christopher Dodd, who is the chair of the Senate Banking Committee. "I expect many serious questions will be raised about the role of the Federal Reserve moving forward and what authorities it should and should not have."

"I am extremely pleased to learn that Ben Bernanke has been nominated for a second term as chairman of the Federal Reserve," read a statement by Jean-Claude Trichet, the President of the European Central Bank. "We have had an excellent and very close working relationship during the current episode of exceptional challenges for the world economy. The Federal Reserve and the European Central Bank have, together with other central banks, initiated an unprecedented level of close cooperation, which has been key in coping with the present situation."