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October 09, 2013

Obama Taps Yellen to Replace Fed Chief Bernanke

by Mil Arcega

President Barack Obama has named Federal Reserve Vice Chairman Janet Yellen to head the U.S. central bank after Ben Bernanke steps down at the end of January. The US senate still has to confirm Yellen, but analysts believe she’s a safe choice to steer US monetary policy in troubled economic times.

She’s poised to become the first woman to head the U.S. central bank. And with more than a decade at the Federal Reserve, Janet Yellen may be one of the most qualified to run it.
    
President Obama described her as tough and effective.

“She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession.  She doesn’t have a crystal ball but what she does have is a keen understanding about how markets and the economy work not just in theory but also in the real world," said President Obama.

The 67-year-old economist is being tapped to take the reins of the U.S. central bank when Chairman Ben Bernanke steps down in January.  She thanked the president for his trust in her and vowed to preserve the Federal Reserve’s mandate.

“If confirmed by the Senate, I pledge to do my utmost to keep that trust and meet the great responsibilities that Congress has entrusted to the Federal Reserve, to promote maximum employment, stable prices and a strong and stable financial system," said Yellen.

The president also heaped praise on Bernanke for providing a steady hand - through the worst financial crisis in decades.

“He has truly been a stabilizing force not just for our country but for the rest of the world," said Obama.

Under Bernanke’s leadership, the Fed cut short term interest rates to near zero and has kept long term rates at record lows with an $85 billion a month bond buying program.  

Financial markets welcomed the Yellen nomination as a nod to continuity.
 
Former central bank official Joseph Gagnon says Yellen is likely to continue Bernanke’s policies.

“I don’t see big changes. I think they’re both rather collegial in terms of encouraging, trying to get consensus within a group as much as possible, so I think that will continue," said Gagnon.

Analysts expect an easy confirmation by the Democratic controlled Senate with help from moderate Republicans.  But given the sharp partisan divide in Congress, economists say Yellen’s biggest challenges are yet to come.