Yellen to get nod as Fed chair
Ms Yellen, 67, has been the Fed's vice-chairwoman since 2010, and she will be the first woman to run the central bank. She is also expected to win bipartisan support for her new role in the Democratic-controlled Senate, but some Republicans could throw up hurdles.
Her nomination was widely expected, but she was not thought to be Mr Obama's first choice. For months, speculation was that the president would opt for Lawrence Summers, a former adviser to the president. But Mr Summers dropped out of the running last month in the face of opposition from Democratic senators. Some in the administration blamed Yellen advocates for churning up opposition to him.
A New York native, Ms Yellen was previously president of the Federal Reserve Bank of San Francisco, a White House adviser, a Fed governor in the Clinton administration and a long-time professor at the University of California, Berkeley.
The most important decisions awaiting her involve how quickly to wind down the expansionary monetary policy engineered by the present Fed chairman, Ben Bernanke. Ms Yellen worked closely with Mr Bernanke, whose term ends on January 31, in shaping and building support for that approach to stimulate the economy and bring down unemployment.
If anything, Ms Yellen has wanted the Fed to take even more aggressive measures to lift growth, believing the risks of inflation are modest. But her views and Mr Bernanke's appear close enough that markets have considered her potential ascension a sign of continuity at the Fed.
Since 2009, Mr Obama had anticipated that he might eventually nominate Mr Summers, who for the first two years of the presidency was chief White House economic adviser as director of the National Economic Council. The president came to admire Mr Summers, a former Treasury secretary in the Clinton administration, for the advice he provided at the depths of the financial crisis. In contrast, he does not know Ms Yellen well.
Ms Yellen, described by one former colleague as "a small lady with a large IQ", forged an academic career at Berkeley as a member of the economics counterculture that attacked the dogma of efficient markets. She has long argued that markets benefit from regulation to prevent abuses and limit disruptions of economic growth.
The Fed's two main tasks are helping to regulate the financial system and altering interest rates in response to economic growth and inflation. Regulating the financial system has become a much more important part of the Fed's responsibilities in the wake of the financial crisis. Many Democrats believe Ms Yellen is likely to view Wall Street more sceptically than Mr Summers, even though her views are closer to the centrist stance of the administration than to the positions of liberal Democrats on several regulatory issues.
Malcolm Maiden — Page 32
Frequently Asked Questions about this Article…
Janet Yellen was nominated by President Barack Obama to be chairwoman of the US Federal Reserve. She has been the Fed’s vice-chair since 2010, previously served as president of the Federal Reserve Bank of San Francisco, was a Fed governor in the Clinton administration, a White House adviser, and a long-time professor at UC Berkeley. She would be the first woman to run the central bank.
Investors see Yellen as close to outgoing chair Ben Bernanke, so her nomination has been viewed as a sign of continuity. She worked with Bernanke on the Fed’s expansionary policies and has argued for even more aggressive steps to lift growth, believing inflation risks are modest — which suggests a continued accommodative approach to interest rates until employment and growth improve.
Markets have considered Yellen’s potential ascension a sign of continuity at the Fed, which can reduce surprise-driven volatility. For investors, that generally means monetary policy is unlikely to pivot sharply away from current stimulus approaches in the near term.
Yellen comes from an academic background that questioned efficient‑markets dogma and has long argued that markets benefit from regulation to prevent abuses. Many Democrats expect her to view Wall Street more skeptically than some other candidates, so investors should prepare for a strong regulatory focus alongside monetary policy decisions.
The article notes that regulating the financial system became a bigger Fed responsibility after the crisis and Yellen supports regulation to limit disruptions. That emphasis could mean closer supervision of financial institutions and policies aimed at reducing systemic risk, which can affect bank stocks, lending standards and broader market confidence.
Yellen was expected to win bipartisan support in the Democratic-controlled Senate, though some Republicans could raise hurdles. For investors, a smoother confirmation reduces uncertainty; a contentious process can create short-term market volatility until the appointment is resolved.
Key decisions include how quickly to wind down the Fed’s expansionary monetary policies engineered to stimulate growth and lower unemployment. Investors should watch signals on the pace of tapering stimulus, any shifts in interest‑rate guidance, and commentary on inflation and employment.
Yellen’s long Fed experience, academic background and preference for active policy to boost growth suggest she will prioritize job creation and be cautious about moving too fast on rate hikes. Practical signals to watch are Fed minutes, her public speeches, inflation readings and employment data — these will indicate how quickly the Fed may change policy.
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