President Barack Obama will nominate Federal Reserve vice chair Janet Yellen to succeed Ben Bernanke as chairman of the U.S. central bank, the White House said Tuesday. Yellen would be the first woman to head the powerful Fed, taking over at a pivotal time for the economy and the banking industry.

Both Yellen and Bernanke are scheduled to appear with Obama at the White House on Wednesday for a formal announcement.

Bernanke's term ends in January, completing a remarkable eight-year tenure in which he helped pull the U.S. economy out of the worst financial crisis and recession since the 1930s.

Under Bernanke's leadership, the Fed created extraordinary programs after the financial crisis erupted in 2008. It lent money to banks after credit markets froze, cut its key short-term interest rate to near zero and bought trillions in bonds to lower long-term borrowing rates.

Those programs are credited with helping save the U.S. banking system.

Yellen emerged as the leading candidate after Lawrence Summers, a former Treasury secretary whom Obama was thought to favour, withdrew from consideration last month in the face of rising opposition.

Yellen, 67, would likely continue steering Fed policy in the same direction as Bernanke. 

As vice chair since 2010, Yellen has helped manage both the Fed's traditional tool of short-term rates and the unconventional programs it launched to help sustain the economy after the financial crisis erupted in 2008. These include the Fed's monthly bond purchases and its guidance to investors about the likely direction of rates.

A close ally of Bernanke, Yellen has been a key architect of the Fed's efforts to keep interest rates near record lows to support the economy.

Her comments in the Fed minutes show her support for continuing stimulus, until the U.S. economy shows clear signs of recovery.

Her appointment comes amid a federal shutdown as Obama and the Republican-controlled Congress battle over the U.S. budget. The Republicans are demanding changes in health care before they will approved the funding to pay for government operations and raise the debt ceiling.

Oct. 17 looms as a deadline for an end to the impasse, as that is the date when the U.S. government runs out of money, having reached its $16.7 trillion borrowing limit.

In the meantime, federal departments that would provide economic data, including numbers about jobs, economic growth, exports and business expectations are not operating.

In the absence of this data, the Fed is unlikely to change course and many are now predicting the $85-billion US a month bond-buying program that keeps interest rates low will continue throughout the fall.

with files from CBC News