Janet Yellen is expected to ascend to the top spot at the Federal Reserve, becoming the first woman to lead the world’s most powerful central bank.
President Barack Obama will nominate the current-vice chair Wednesday afternoon to succeed Ben Bernanke, who led the central bank through the financial crisis and brutal recession, and whose term expires Jan. 31.
Ms. Yellen still has to be confirmed, and observers expect that to happen, though there could be some bumps given the current climate in Washington.
As The Globe and Mail’s Washington correspondent Kevin Carmichael reports, Ms. Yellen will now be among the powerful forces in the world of economics and monetary policy.
Here’s what observers are saying:
“Yellen will be nominated today to be the chairman of the Fed and has the support of key Democrats for her Senate confirmation. While the Senate is the senior body, it doesn't necessarily mean the process will be smooth or fast. Being painted an ultra-dove is not going to go down well with the tea party. For now, this nomination is boosting expectations of money printing.” Sébastien Galy, Société Générale
“The nomination of Janet Yellen as Fed Chair, to be announced today according to the White House, and likely to be approved early in 2014, does not usher in a new era of more dovish policy for the Fed as some in markets may fear. Yellen’s [Federal Open Market Committee] voting record has matched Bernanke’s and her speeches have largely echoed the themes of her predecessor. Bonds may see a temporary boost on the appointment of Yellen to the helm (pending Senate confirmation), given her support of the Fed’s overall dovish stance. However, assuming an amicable passing of the current debt ceiling and budgetary deadlock, we see longer-term risks of a sell-off as the drag from fiscal policy eases in 2014, giving even a Yellen-led Fed justification to scale back bond-buying by early next year.” Emanuella Enenajor, CIBC World Markets
“Yellen has been a fairly consistent advocate that the Fed cannot ignore the ‘full employment’ component of its dual mandate. Over the past number of years, Yellen has tended to speak directly and bluntly about the FOMC’s responsibility to pursue an accommodative monetary policy in order to try and encourage full employment in the economy. In a speech to the AFL-CIO in February 2013 ... Yellen argued that ‘with employment so far from its maximum level and with inflation currently running, and expected to continue to run, at or below the committee's 2-per-cent longer-term objective, it is entirely appropriate for progress in attaining maximum employment to take centre stage in determining the committee's policy stance.’ The appropriate policy stance outlined by Yellen in that speech was open-ended [asset purchases known as quantitative easing] and aggressive forward guidance.” Derek Holt, Dov Zigler, Bank of Nova Scotia
“The outlook for monetary policy will be little changed when Janet Yellen replaces Ben Bernanke as Fed chair at the end of January. At this stage, Yellen is unquestionably the best candidate. But there is a slightly bigger risk that under her stewardship, the Fed will fail to tighten monetary policy in time once the recovery gathers momentum, eventually triggering an unwanted surge in inflation.” Paul Dales, Capital Economics
“She may be the Queen of Doves in monetary policy circles but even if she were Superwoman, she wouldn't be able to solve the U.S. fiscal/political crisis on her own.” Kit Juckes, Société Générale
“Whether Yellen's appointment will have much of a bearing on when the Fed starts tapering [its asset purchases] is yet to be seen. There is a still a chance that the Fed will not taper before the end of Bernanke’s term, and even if they do, there’s no reason why the purchases cannot be increased again, or the pace of tapering slowed. Yellen will play a key role in the tapering process, if appointed, and this can only be of benefit to investors who have benefitted from the loose monetary policy over the last 12 months.” Craig Erlam, Alpari