Obama nominates Janet Yellen as Fed chief

US President Barack Obama has nominated Federal Reserve Vice Chair Janet Yellen to run the world’s most influential central bank, providing some relief to markets that would expect her to tread carefully in winding down economic stimulus.

The nomination on Wednesday puts Yellen on course to be the first woman to lead the institution, and the first to head a central bank in any Group of Seven industrial nation.

Yellen, an advocate for aggressive action to stimulate US economic growth through low interest rates and large-scale bond purchases, is to replace Fed chairman Ben Bernanke, whose second term ends on January 31.

If confirmed by the US Senate, which is expected to endorse her, she would provide continuity with Fed policies under Bernanke and would likely move cautiously in reining in policies in place to shore up the world’s largest economy.

Obama said that she was a proven leader who knows how to build consensus in managing the Fed’s dual mandate of controlling inflation and increasing employment. 

The US President also paid tribute to the Bernanke, calling him a voice of wisdom during a time of market volatility who helped repair the US economy from the worst recession since the Great Depression.

‘Good egg’

“We need a Federal Reserve Chair who is both qualified and experienced, and who would look at policy-making through the lens of what’s best for the middle class. Janet Yellen is exactly that,” said Senate Banking Committee member Jeff
Merkley, a Democrat from Oregon.

Expectations that the Fed might start to taper its stimulus program have been a concern for financial markets since May. The central bank shocked investors in September by maintaining its cash injections of $85bn a month in full. 

Yellen’s nomination coincides with a political stalemate in Washington that has partially closed the US government and
threatened a US default if lawmakers fail to raise the country’s $16.7 trillion debt ceiling by an October 17 deadline.

If confirmed, she would join the Fed’s honor 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.

“I believe she’ll be confirmed by a wide margin,” said Senator Charles Schumer, a Democrat from New York. 

Described as a “good egg” by fellow Fed policymaker Richard Fisher and a “very able person” by Japan’s Chief Cabinet
Secretary Yoshihide Suga, her most immediate challenge may be to determine when the Fed should reduce its bond buying. 

Obama turned to Yellen, 67, after his former economic adviser Lawrence Summers withdrew from consideration in the face of fierce opposition from within the president’s own Democratic Party, raising questions about his chances of congressional confirmation.