Thursday, October 10, 2013

Janet Yellen Fed nomination no "rubber stamp" for US Senate

United States president Barack Obama has formally nominated Harvard economics professor Janet Yellen as the next chair of the Federal Reserve.

Mr Obama described the nomination as one of the most important economic decisions he would make as president.

Listen to my analysis from this morning's edition of AM.

Dr Yellen, a Brooklyn native, has been vice chair of the Fed since 2010.

Ben Bernanke's eight-year term as chairman ends in January.

If confirmed by the US Senate, Dr Yellen would be the first woman to hold the post in the Reserve's 100-year history.

Mr Obama said that would make her a role model for many.

The announcement appears to have been brought forward, as Mr Obama tries to calm financial markets amid concerns the US government will default on its debts if it fails to raise the debt ceiling by October 17.

Dr Yellen has pledged to promote maximum employment, stabilise prices and create a strong and stable financial system.

She says the US has made progress in recovering from the Great Recession, but more needs to be done.

AUDIO: Business editor Peter Ryan on Dr Yellen's nomination(AM)

"Too many Americans still can't find a job and worry how they'll pay their bills and provide for their families," Dr Yellen said.

"The Federal Reserve can help if it does its job effectively."

Dr Yellen is highly regarded by other central bankers around the world and like Dr Bernanke, she seen as a steady hand five years after the collapse of Wall Street.

Mr Obama says Dr Yellen ticks all the boxes he wants in a Fed chief.

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

"Janet is exceptionally well qualified for this role. She has served in leadership positions at the Fed for more than a decade.

"Janet is renowned for her good judgement. She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession."

Dr Yellen joined Mr Obama in praising Dr Bernanke, who was present at the event, saying he was the epitome of calm, serenity and courage during the worst financial crisis since the Great Depression.

It is possible she will meet Republican resistance during Senate confirmation, but Dr Yellen sent a very clear message that she was more than up to the job.

Dr Yellen is considered to be "dovish" on policy, concerned more with job creation than the risk of inflation.

Thomson Reuters senior analyst John Noonan says that stance and the debt debacle in Washington will keep the Fed's aggressive bond-buying program in place for now.

"I don't think it's fair to typecast her as somebody who's always going to be taking easy monetary policy," Mr Noonan said.

"In her past she has warned about inflation, so I think until she sees the inflation pressures she is going to focus on improving the employment situation in the US.

"There's less likelihood of bond tapering also because of the damage that's been done to the economy from this latest episode."

Like Dr Bernanke, she will be trying her best to demystify the craft of monetary policy and cut the jargon.

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