US President Barack Obama has nominated Fed number two Janet Yellen on Wednesday 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 puts Yellen on course to be the first woman to lead the institution in its 100-year history. The advocate for aggressive action to stimulate US economic growth through low interest rates and large-scale bond purchases would replace Ben Bernanke, whose second term as Fed chairman expires on January 31.
If confirmed by the US Senate, which is expected to endorse her, she would provide continuity with the policies the Fed has established under Bernanke. Analysts say she would move cautiously in reining in policies in place to shore up the world’s largest economy.
Expectations that the Fed might start to taper its stimulus programme have roiled financial markets since May and the central bank shocked investors in September by maintaining its cash injections of $85 billion a month in full.
“Thank God Yellen will be nominated under the current circumstances. You don’t want a change at the central bank right now,” said Dan Fuss, a portfolio manager at Loomis Sayles in Boston. “This Yellen news is one uncertainty lifted from already nervous markets.”
Her nomination comes during a political stalemate in Washington that has closed the US government and threatened a US default if lawmakers fail to raise the $16.7-trillion debt ceiling by an October 17 deadline.
US stock index futures rose and the dollar slipped on the news of Yellen’s pending nomination. The debt standoff is fueling expectations the Fed may delay any plans to reduce its stimulus for now.
If confirmed, she would join the Fed’s honour 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