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Obama picks 'exceptionally qualified' Yellen to lead Fed

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(Globalpost/GlobalPost)

US President Barack Obama on Wednesday nominated economist Janet Yellen to lead the Federal Reserve in a move expected to sustain the Fed's easy money policies and its focus on cutting joblessness.

If approved, Yellen would replace outgoing Ben Bernanke as chair of the world's most powerful central bank next February, under heavy pressure to make sure that it does not derail global growth as it reins in its stimulus policy.

Obama called the first woman ever named to take the helm at the Fed "exceptionally qualified", saying she is "committed to increasing employment."

"America's workers and families will have a champion in Janet," Obama said at a White House ceremony, flanked by Yellen and Bernanke.

"She is a proven leader, and she's tough. Not just because she is from Brooklyn," he quipped.

Obama said Yellen "sounded the alarm early" about the housing and financial bubbles that led to the 2008-2009 recession.

"She doesn't have a crystal ball, but what she does have is a keen understanding of how the markets and the economy work, not just in theory but also in the real world," he added.

Yellen made clear Wednesday that she would not break with the US central bank's current easy-money policies aimed at pushing down unemployment, still high at 7.3 percent in August.

"More needs to be done to strengthen the recovery, particularly for those hardest hit by the Great Recession," she said as she accepted Obama's nomination.

"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'll pay their bills and provide for their families."

Yellen, 67, a deeply respected economist with years of experience in academia and the central bank, has served as Fed vice chairman since 2010.

In that time she has been closely tied to key policy changes, including setting targets for inflation and unemployment, and making the thinking of Fed policymakers more open, to help markets better understand their direction.

New York-born Yellen studied economics at Brown University and then Yale, where she earned a doctorate.

She is married to economics Nobel prize winner George Akerlof, who teaches at the University of California, Berkeley. Both are known for taking economic texts to the beach on vacation.

"The truth is," Yellen once told an interviewer, "if you spent an evening at our house you would probably hear economics discussed over the dinner table."

"You would eat a diet that is richer in discussions of economics and policy issues than many people would find appetizing."

Her nomination was not a surprise after the presumed favorite, former Treasury secretary Lawrence Summers, pulled out of the running due to opposition from Obama's Democratic allies in the Senate.

Yellen's nomination requires Senate confirmation.

Though criticized by conservatives as a Fed "dove" -- one of a camp allegedly too determined to stimulate growth and not adequately worried about the threat of inflation -- Yellen is likely to get a better reception in the Senate than Summers would have received.

Senator Elizabeth Warren, who was part of the Democratic revolt on the Senate Banking Committee against a Summers nomination, gave Yellen a thumbs-up on Wednesday.

"Janet has extraordinary experience and a proven track record of strong judgment and management savvy," Warren said in a statement.

The committee's senior Republican, Mike Crapo, was more measured, saying her nomination would be "carefully reviewed," noting his own opposition to the Fed's $85 billion a month bond-buying stimulus, known as quantitative easing.

Markets were generally ho-hum about the nomination, with the S&P 500 stock index ending the day flat, and the US dollar edging higher along with long-term bond yields.

But the pick earned cheers in international circles.

International Monetary Fund Managing Director Christine Lagarde -- perhaps the other most powerful woman in world finance -- called the nomination "great".

"She's very competent, she's my friend, I'm delighted she's there," said Lagarde, who in recent months has sternly warned the Fed not to cut back its stimulus too fast to avoid injecting more turbulence into global markets.

Indeed, one of Yellen's first tasks will be to judge how quickly to taper the huge stimulus.

Economists and markets had expected the cuts to begin last month.

But the Bernanke-led Federal Open Market Committee held off, pointing to some signs of weakness in the economy and the threat to stability posed by Washington's political paralysis over the budget and debt ceiling.

Economists said Yellen will not rush it, but will cut the stimulus when the economy is ready.

"A Yellen Fed would likely taper slowly and cautiously, but would not necessarily delay the start, which we expect to begin in December, unless fiscal policy issues remain unresolved," said Paul Edelstein of IHS Global Insight.

"Yellen is considered a policy 'dove' but has expressed a preference for low levels of inflation. We don't anticipate a higher rate of inflation under a Yellen Fed."

pmh/sst

http://www.globalpost.com/dispatch/news/afp/131009/obama-picks-exceptionally-qualified-yellen-lead-fed