Ben Bernanke, expected to be named the new chairman of the Federal Reserve, will be important to where short-term and long-term interest rates go.

NEW YORK (CNN/Money) - If you borrow money, have a mortgage, or worry about inflation ... then the person running the Federal Reserve should matter to you.

The nation's central bank sets short-term interest rates which are used as a peg for a number of different loans, including home equity lines of credit and business loans pegged to banks' "prime rate." Adjustable-rate mortgages also closely follow the short-term rates set by the Fed.

The Fed has raised rates by a quarter percentage point at its last 11 meetings. Whether the Fed keeps this "measured" pace of rate hike to battle inflation or stops its tightening early in the new chairman's tenure will affect how much money many homeowners have to spend, and how much businesses can expand.

"That's going to be driven by the decision making of the new Fed chairman," said John Silvia, chief economist at Wachovia Securities.

Longer-term interest rates are set by the bond market more than the Fed. But Silvia and other Fed watchers say that one reason for the recent "conundrum" of long-term rates staying low while the Fed raised short-term rates is that traders had confidence that the Fed would keep inflation in check. That lack of inflation concern by the markets allowed fixed-rate mortgages other long-term borrowing to stay low.

A low inflation rate is important to prices paid by consumers and businesses for a wide variety of goods, and is seen as a key to steady economic growth.

"It gives the bond market a comfort level that you have a replacement just as vigilant on inflation as Greenspan was," said Fed watcher Greg Valliere of the Stanford Washington Research Group.

In recent years Greenspan has helped to shape debate on a number of topics, from Social Security reform to taxes to federal deficits.

Valliere said he doesn't believe the new pick will take as active a role as Greenspan in those debates, at least in the short-term.

"Down the road he might ... for now the main task is to convince the market he's solid," he said.

Valliere said he doesn't believe the markets will be rattled that Bush picked former Fed governor Ben Bernanke.

"The markets are expecting this guy. I think this is a non-story for the markets which is exactly what they needed to have," he said.

In an online poll conducted by CNN, half of respondents said they thought the Fed affected their life a lot, while only 7 percent answered that the Fed did not affect their life at all.

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