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article imageSenate votes in Yellen as first woman chair of Federal Reserve

By Robert Myles     Jan 7, 2014 in Politics
Washington - The U.S. Senate, Monday, approved the appointment of Janet Yellen as head of the Federal Reserve. Yellen, 67, will become the first woman to preside over the US central bank, the most powerful in the world.
The voting for Yellen in the Senate was clear-cut. Fifty-six senators approved her appointment, more than twice as many as those opposed, at 26 against. Most Republicans voted against Yellen assuming office, taking the opportunity to criticize the Fed’s extremely loose monetary policy since the 2007-2009 credit crisis. Yellen has been a consistent advocate of the Fed’s post-crisis policies.
Democrat Yellen was a favoured candidate among a number of leading economists, notably Princeton University’s Paul Krugman, a past Nobel prize-winner. But Yellen wasn’t President Obama’s first choice to lead the 100-year-old Fed. The President had originally canvassed Larry Summers.
Summers has wide experience being a former director of Obama’s National Economic Council, and a former Treasury Secretary in the Clinton. But for many in Congress, Summers was too closely associated with the policies of financial re-regulation which many saw as contributing to the financial meltdown of 2008. Only after it became clear that Summers’ appointment would meet stiff opposition from key Democrats did the President turn to Yellen.
Janet Yellen has served as vice-president of the Fed since 2010. She will assume office on Feb. 1, taking over from Ben Bernanke. Bernanke has served since 2005. He was originally appointed by President George W. Bush, and then reappointed by President Obama, to serve a further four year term, in 2009.
On taking over, Yellen faces the task of tightening US monetary policy and weaning the US economy off the life-support of liquidity injections, or quantitative easing, which the Fed has deployed over the past five years.
Yellen is likely to follow the course plotted by Bernanke. In the past she’s called for the Fed to continue underpinning the economy while economic recovery remains fragile and unemployment high. In November, although US unemployment hit a five-year low, it remained high at 7 percent.
On interest rates, it’s unlikely Yellen will depart from the forward rate guidance issued by the Fed last December that the near zero key rates in force since 2008 will be maintained until unemployment numbers decline to 6.5 percent. Even then, it’s possible the Fed will downscale the unemployment trigger point for interest rates to start to rise.
In a written statement President Obama welcomed Yellen’s appointment, saying, "The American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families."
But from the Republican side there were claims the fight against inflation would take a back-seat with the Fed under Yellen’s stewardship. Sen. Charles Grassley, R-Iowa, criticized Yellen’s support of the Fed's "easy money" policies of low interest rates and bond purchases, reports ABC News. Calling for low inflation and a strong dollar, Grassley said, “No one can deny that the risks are real and could be devastating," if those policies continued for too long.
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