Yellen to get nod as Fed chair

President Barack Obama is to nominate Janet Yellen as chairwoman of the US Federal Reserve, ending an unusually prolonged and public search to fill one of the most important economic policy-making jobs in the world.

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