President Barack Obama will nominate Federal Reserve Vice Chairwoman Janet Yellen to become the next head of the nation's central bank on Wednesday, White House officials said. Yellen would be the first woman to lead the Fed.
If confirmed, Yellen would replace Ben Bernanke, whose current term as head of the Fed ends in January. Yellen will take over at a pivotal time for U.S. monetary policy, as the country continues to work its way out of a recession.
During Bernanke's tumultuous eight-year tenure he helped pull the U.S. economy out of the worst financial crisis and recession since the 1930s.
Under Bernanke, the Fed implemented unprecedented programs after the financial crisis erupted in 2008. It lent money to banks after credit markets froze, cut its key short-term interest rate to near zero and bought trillions in bonds to lower long-term borrowing rates.
A close ally of the chairman, Yellen has been a key architect of the Fed's efforts under Bernanke to keep interest rates near record lows to support the economy, and she would likely continue steering Fed policy in the same direction as Bernanke.
Obama's choice of Yellen coincides with a key turning point for the Fed. Within the next several months, it is expected to start slowing the pace of its Treasury and mortgage bond purchases if the economy strengthens. The Fed's purchases have been intended to keep loan rates low to encourage borrowing and spending.
As vice chair since 2010, Yellen has helped manage both the Fed's traditional tool of short-term rates and the unconventional programs it launched to help sustain the economy after the financial crisis erupted in 2008. These include the Fed's monthly bond purchases and its guidance to investors about the likely direction of rates.
Yellen has built a reputation as a "dove" — someone who is typically more concerned about keeping interest rates low to reduce unemployment than about raising them to avert high inflation. Her nomination could face resistance from congressional critics who argue that the Fed's low-rate policies have raised the risk of high inflation and might be breeding dangerous bubbles in assets like stocks or real estate.
Republican Sen. Bob Corker of Tennessee, member of the Senate Banking Committee, said he voted against her for vice chair in 2010 because of her dovish policies. "I am not aware of anything that demonstrates her views have changed," he said.
Still, Yellen has said that when the economy finally begins growing faster, rates will need to be raised to prevent high inflation, and she will move in that direction.
Yellen has been seen as a safer choice for the president, who first attempted to nominate former Treasury Secretary Lawrence Summers. Summers dropped his bid after mounting pressure from liberal groups who claimed he was not suited to lead the Fed.
Yellen drew outspoken support from Senate Democrats, a third of whom signed a letter this summer urging Obama to choose her. Last month, more than 350 economists signed a letter to Obama urging him to nominate Yellen.
If confirmed by the Senate, Yellen would be the first Democrat chosen to lead the Fed since Paul Volcker was picked by Jimmy Carter in 1979. She would also be the first vice chair of the Fed to ascend to the chairmanship.
Yellen, like Bernanke, was a distinguished college economics professor before joining the Fed. She taught at the University of California at Berkeley from 1980 until 1994 when President Bill Clinton chose her to join the Fed's board in Washington. She served on the Fed's board of governors until February 1997, when Clinton chose her to lead the White House Council of Economic Advisers.
Yellen would not only be the first woman to head the U.S. central bank; she also would be the first woman ever to head a major central bank anywhere in the world.
Al Jazeera and wire services
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