Janet Yellen has firmly backed the Fed’s aggressive steps to spur US economic growth. Photo: AP
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From Business Day with Reuters – October 9, 2013
US President Barack Obama will nominate Federal Reserve vice-chairwoman Janet Yellen to be the next head of the US central bank tomorrow, a White House official has said.
If confirmed by the US Senate, Ms Yellen would replace Ben Bernanke, whose current term as head of the Fed ends in January.
Mr Obama is due to make the announcement at the White House tomorrow. Mr Bernanke is also scheduled to attend.
Ms Yellen would be the first woman to lead the institution in its 100-year history.
She became the favourite for the position after the other leading candidate, former Treasury secretary and White House economic adviser Lawrence Summers, withdrew from consideration amid mounting opposition from Democrats on the Senate Banking Committee.
US Senator Charles Schumer, the third-ranking Senate Democrat, predicted today that Ms Yellen would win “by a wide margin” Senate confirmation to be the next head of the US central bank.
Ms Yellen has been a forceful advocate of aggressive action to drive down unemployment and would provide continuity with the policies the Fed has established under Mr Bernanke.
In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed’s first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs.
The former professor has a long history in the top ranks of economic policymaking, including her service over the past three years as the Fed’s No. 2 official.
If confirmed, she would succeed Mr Bernanke when his second four-year term expires on January 31.
Ms Yellen would have to oversee the tricky process of reversing the extraordinary stimulus the US central bank put in place to shore up the world’s largest economy, which eclipses Japan and China put together.
If she wins the Senate’s backing, as expected, she would join the Fed’s honour roll along with such household names as Paul Volcker and Alan Greenspan, predecessors as head of an institution that can influence the course of the world economy.
Mr Obama turned to Yellen after his former economic adviser Lawrence Summers withdrew from consideration amid fierce opposition from within Obama’s own Democratic Party, which raised questions about his chances of being confirmed in Congress.
In contrast, Ms Yellen has enjoyed strong support from Democrats. In an unusual move, 20 Senate Democrats signed a letter pressing Mr Obama to turn to the former professor from the University of California at Berkeley.
Her backing on the Republican side of the aisle is much softer. Many Republicans worry the Fed’s policy of holding overnight interest rates at zero and the massive bond purchases it has pursued to drive other borrowing costs lower threaten to create asset bubbles and spark an unwanted pickup in inflation.
Still, Ms Yellen is expected to garner enough support to secure the 60 votes needed to overcome any procedural hurdles in the 100-seat Senate. Democrats control the chamber 54-46.
A respected economist whose research has taken her deep into theories of monetary policy, Ms Yellen has earned a reputation as one of the Fed officials most worried about unemployment and least worried about inflation.