Janet Yellen takes big step toward becoming next Fed chair

Written by Reuters | Washington | Updated: Nov 22 2013, 07:06am hrs
YellenThree Republicans vote in her favor, one Democrat against (Reuters)
Federal Reserve Vice Chair Janet Yellen moved closer on Thursday to becoming the first woman to lead the U.S. central bank after a Senate committee backed her nomination and sent it to the full Senate, which seems certain to grant its approval.

Once confirmed, Yellen will replace Fed Chairman Ben Bernanke when his term expires on Jan. 31 and become the most powerful woman in world finance. A Democratic aide said the Senate would likely vote in December.

Her path to winning confirmation became even clearer on Thursday as Senate Democrats forced through a rule change that lowered the votes needed to end procedural roadblocks on most presidential appointments to 51 from 60. Democrats control 55 of the chamber's 100 seats.

Once procedural hurdles are overcome, Yellen would need 51 votes in her favor to secure her confirmation.

Nominated by President Barack Obama, Yellen is viewed as a monetary policy dove more concerned about the costs to society of high unemployment than about the risk aggressive actions to lower it will ignite future inflation or fuel asset bubbles.

She will preside over a central bank that has taken dramatic and unconventional steps to spur economic growth, and which is now wrestling with a decision on when to scale back a bond-buying program that has sought to drive down long-term market interest rates.

The Fed has held benchmark U.S. interest rates near zero since late 2008 and has quadrupled the size of its balance sheet to $3.9 trillion through three massive asset purchase campaigns. It is currently buying $85 billion in bonds a month.

Both Yellen and Bernanke have emphasized in recent days that the Fed will keep interest rates low for some time even after it winds down its asset purchases, remarks that have bolstered expectations of policy continuity at the central bank.


Minutes of the Fed's October meeting released on Wednesday showed policymakers were debating how best to enhance their forward guidance on when they might raise rates to help temper any economically disruptive moves in financial markets once they start to taper their bond buying.

The Fed has said it would not raise rates before the U.S. jobless rate falls to 6.5 percent, as long as inflation looked set to stay below 2.5 percent. Unemployment stood at 7.3 percent in October.

When Bernanke first broached the possibility of a near-term reduction in the asset purchases in May and June, he sparked a bout of global financial market turmoil that sent bond yields soaring and hit emerging markets hard.

The Fed's aggressive actions have drawn fire from Republican lawmakers worried about the risk of inflation and asset bubbles. Many Republicans also complain the central bank has abetted big spending by the Obama administration by snapping up the bulk of new Treasury debt issuance.

In the end, only three Republicans on the Senate Banking Committee supported Yellen as the panel approved her nomination on a 14-8 vote. One Democrat voted no.

"The long-term costs of these policies are unclear and frankly worrisome," the committee's top Republican, Senator Michael Crapo, said.

Even before the Senate rule change, Yellen appeared on track to win the 60 votes she would have needed to overcome any procedural hurdles.

In addition to the three committee Republicans who supported her - Bob Corker of Tennessee, Tom Coburn of Oklahoma and Mark Kirk of Illinois - Republican Senators Susan Collins of Maine and Lindsey Graham of South Carolina had also indicated they were inclined to back her.

The Democrat who voted against her in committee was Joe Manchin of West Virginia.