WASHINGTON – The Federal Reserve, in the last major piece of business for retiring chairman Alan Greenspan, pushed borrowing costs to the highest point in nearly five years yesterday and hinted that another rate increase was possible.

Shortly after the Fed’s rate announcement, the Senate – showing broad bipartisan support – approved on a voice vote Ben Bernanke’s nomination to be the 14th chairman of the central bank. Mr. Bernanke, 52, will be sworn in as Fed chief this morning in a private ceremony at the Fed’s marble headquarters.

That will make the historic changing of the guard at the Fed complete.

Mr. Greenspan, 79, ends an 18 1/2-year run, making him the second-longest serving chairman of the central bank. He turns over to Mr. Bernanke an economy that is in good shape but faces challenges.

“I know this institution will go on doing extraordinary things, and I will look on from the sidelines and cheer,” Mr. Greenspan was quoted as saying at his farewell luncheon.

Questions persist about whether the housing market will continue to gradually decline or even crash. No one knows whether foreigners will maintain a hearty appetite for investing in America and continue to finance ballooning budget and trade deficits. Energy prices pose another wild card.

“Greenspan’s shoes are very large and difficult to fill. If anybody is up to the task, Ben Bernanke is the guy,” an economics professor at Michigan State University, Charles Ballard, said.

Mr. Bernanke, chairman of the White House’s Council of Economic Advisers, is a former Fed governor and economics professor. He is considered one of the country’s foremost economic thinkers and has written extensively about the Great Depression.

In opting to boost rates yesterday, Fed policy-makers said “the expansion in economic activity appears solid” even though recent economic barometers “have been uneven.” Inflation, they said, remains a concern. “Elevated energy prices have the potential to add to inflation pressures.”

At Mr. Greenspan’s final meeting, the Fed boosted the federal funds rate by one-quarter percentage point to 4.50%. The funds rate, the interest banks charge each other on overnight loans, affects a range of interest rates charged to consumers and businesses.

In response, commercial banks raised their prime lending rates – for certain credit cards, home equity lines of credit and other loans – by a corresponding amount to 7.50%.

The increases left borrowing costs at their highest level in nearly five years.

Many economists believe the Fed probably will boost the funds rate at least one more time – to 4.75% – at its next meeting on March 28, the first session Mr. Bernanke will preside over as chairman. A few, however, predict the funds rate could climb to 5.50% this year – a move some analysts believe will be necessary to keep inflation under control.

Fed policy-makers yesterday left the door open to higher rates. “Some further policy firming may be needed” to keep the economy and inflation on an even keel, they said.

That marked a subtle change from the last meeting in December, when Fed policy-makers said “measured policy firming is likely to be needed.”

By dropping the word “measured” and softening the forward-looking language on rates a bit, the Fed was attempting to give Mr. Bernanke more leeway to shape the future course of interest rate policy as he sees fit, economists said.

It provides “Bernanke with a clean slate,” the chief economist at RBS Greenwich Capital, Stephen Stanley, said.

The word “measured,” which had been included in the Fed’s previous rate-raising decisions, was viewed as signaling quarter-point rate increases.

All of the Fed’s 14 rates increase since it began tightening credit in June 2004 have been by one-quarter percentage points.