U.S. President Barack Obama and outgoing Federal Reserve Chairman Ben Bernanke (R) applaud after Obama nominated Janet Yellen (L) to serve as the next head of the Federal Reserve at the White House in Washington October 9, 2013.KEVIN LAMARQUE/Reuters
Janet Yellen, the likely heir to Ben Bernanke's job as head of the U.S. Federal Reserve, signalled that she's in no hurry to reverse monetary stimulus, reassuring investors and irritating some Republican senators who will seek to impede her ascent to one of the world's most influential positions.
President Barack Obama nominated Ms. Yellen to replace Mr. Bernanke at a short White House ceremony Wednesday, a historic moment that brought a temporary reprieve from a budget row that has shut down the government's non-essential services.
Global financial markets were buoyant after word went out Tuesday night that Mr. Obama was ready to officially nominate Ms. Yellen, currently No. 2 at the Fed and Wall Street's favourite to get the top job after Mr. Bernanke retires in January.
The U.S. dollar rose and stock markets ended their shutdown-induced decline as investors bet Ms. Yellen would maintain the Fed's aggressive campaign to stoke economic growth through large purchases of private-sector bonds, also known as quantitative easing. She didn't disappoint, using a short speech to emphasize her immediate goal of a lower unemployment rate.
"While we have made progress, we have farther to go," she said. "The mandate of the Federal Reserve is to serve all the American people, and too many Americans still can't find a job and worry how they will pay their bills and provide for their families." "The Federal Reserve can help if it does its job effectively."
Ms. Yellen would be the first woman to lead the U.S. central bank in its 100-year history, a fact that wasn't missed by some of the other women who have managed the difficult climb to the top ranks of the global financial system.
"She is an excellent choice for this very important post," Christine Lagarde, the former French finance minister who leads the International Monetary Fund, said in a post on her Twitter account.
Standing between Ms. Yellen and history is the Senate, which must approve all senior federal appointments. Ms. Yellen cleared that hurdle in 2010 when she became vice-chairwoman. The betting in Washington is that she will do so again, although not as easily. Many Republicans dislike the Fed's aggressive use of quantitative easing, which requires the government to print money to buy financial assets. The program has pumped some $3-trillion into the economy during Mr. Bernanke's tenure, and Ms. Yellen is seen as one of its key architects.
"I voted against Vice Chairman Yellen's original nomination to the Fed in 2010 because of her dovish views on monetary policy," Bob Corker, a Republican senator from Tennessee, said in a statement. "I am not aware of anything that demonstrates her views have changed."
Ms. Yellen will first be vetted by the Senate Banking Committee, where Democrats have a 12 to 10 majority. Democratic Leader Harry Reid will have to secure the votes of six Republicans on the Senate floor to get the 60 he will need to avoid any procedural hurdles Ms. Yellen's opponents could erect.
"I urge the Senate to confirm Janet without delay," Mr. Obama said, calling her both "tough" and a "champion" of American families.
Mr. Obama also paid tribute to Mr. Bernanke, who is nearing the end of his second four-year term. Mr. Bernanke revolutionized monetary policy, deploying the Fed's powers in previously inconceivable ways to arrest the financial crisis and reverse the Great Recession.
"I'm personally very grateful to you for being such a strong partner in helping America recover from recession," the President said to Mr. Bernanke. "He truly has been a stabilizing force for not only our country but the world."
Mr. Bernanke's job isn't over.
Last month, he managed to win near unanimity at the Fed to delay the tapering of asset purchases. The decision shocked Wall Street, as most investors were convinced the Fed was set to begin winding down the monetary policy measures launched to bolster a sinking economy.
The debate at the Fed was agonizing, according to minutes of the September policy meeting that were released Wednesday. For some, it was a "close call," and there were worries that surprising the markets would undermine confidence in the Fed's messages in the future.
Ultimately, policy makers were persuaded that the data weren't strong enough to justify a change of course that Mr. Bernanke had said would come only when indicators showed the economy was fully mended.
Still, the minutes said that most policy makers expected tapering beginning this year and ending in the middle of 2014.
If that orientation holds, Mr. Bernanke will be in a position to begin phasing out the extraordinary measures he put in place. But his presumptive successor made clear that the exit will be a gradual one.