Global markets heave sigh of relief as Yellen appointed new Fed chief
President Barack Obama named Janet Yellen as the head of the Federal Reserve, giving the world's most powerful central bank its first female leader in its 100-year history.
Ms Yellen (67) will be responsible for setting one of the most important interest rates when she takes over from Ben Bernanke at the end of his second term in January. Though her appointment must still be confirmed by the US Senate, it is expected to pass by a wide margin.
Ms Yellen brings a wealth of experience to the job. She is the current vice-chair and has spent almost a dozen years as a policy maker at the central bank. A respected economist, she tends to focus on unemployment and is less concerned about inflation.
She will take over for a four-year term at a time when the Fed's balance sheet has swollen to more than $3.7trn (€2.7trn), even as the economy continues to struggle.
"She has one of the most challenging tasks the Federal Reserve has ever had," said Laurence Meyer, who served with Ms Yellen on the Fed's board in 1996 and 1997.
Just how difficult a challenge this is has been highlighted by wide swings in the financial markets during the last four months as investors reacted first to suggestions by Mr Bernanke that the central bank would scale back its bond-buying programme – and then to news on September 18 that it had decided, for now, not to.
Investors, who expect her to tread carefully in winding down the current economic stimulus being implemented in the US, reacted positively to the news.
"Thank God Yellen will be nominated under the current circumstances. You don't want a change at the central bank right now," said Boston-based analyst Dan Fuss. "This Yellen news is one uncertainty lifted from already nervous markets."
President Barack Obama turned to Ms Yellen after his former economic adviser Larry Summers withdrew from the race in the face of fierce opposition from Democrats. He was criticised for being instrumental in the 1990s abolition of Glass-Steagall, the US law that prevented retail banks from engaging in the type of speculative trading that fed the 2008 financial crash.
The contest between Mr Summers and Ms Yellen played out very publicly all summer, unusually so for the selection of the top US banker.