President Barack Obama will nominate Janet Yellen to replace Ben Bernanke as chairman of the Federal Reserve, a White House official said Tuesday, in a move that many expect will result in a continuation of the central bank’s loose monetary policy.
Obama will introduce Yellen at a 3 p.m. Eastern ceremony at the White House Wednesday, the official said. Yellen currently serves as vice chairman of the central bank.
Stock futures SPZ3 +0.32% advanced Tuesday night after news of the impending nomination, following a session of sharp selling as the government shutdown continued.
If confirmed by the Senate, Yellen, 67, will be the first woman to run the Fed, one of the world’s most important economic posts.
Economists portray Yellen as a continuation of Bernanke’s aggressive easing stance developed in reaction to the financial crisis.
Many on Wall Street see Yellen as a “dove’ as she is a Democrat and supported asset purchases, otherwise known as QE, said Robert Brusca, chief economist at FAO Economics.
In general terms, a dove on the Fed is an official not strictly focused on fighting inflation.
“It is a label she’s going to have to live with and live down, but I don’t think it will be a big deal,” Brusca said.
The Fed pushed its short-term interest rate tool to zero in December 2008 and ever since has been using innovative asset purchases to try to foster stronger growth — to mixed success. The central bank is now buying $85 billion of bonds each month in an attempt to keep long-term interest rates low and provide support for the economy that has struggled in the wake of the severe financial crisis. Yellen has been a strong supporter of the asset purchases.
These purchases and two earlier rounds of stimulus have swelled the Fed’s balance sheet to over $3.7 trillion.
The key challenge facing Yellen will be to try to scale back the asset purchases, shrink the balance sheet while keeping the economy on a self-sustaining growth path.
The International Monetary Fund on Tuesday urged the Fed to move cautiously and communicate clearly.
Interest rates jumped around the world in May after the Fed said it might begin to taper, or reduce the pace of its asset purchases. The Fed last month decided not to do that to the surprise of many in the market.
Like Bernanke, Yellen is a former academic expert on monetary policy who has eschewed politics. A former professor of economist at the University of California, Berkeley, Yellen is described by colleagues as non-ideological, well-prepared, and cautious.
Some economists had pushed aggressively for Yellen to get the post starting late in 2012.
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