Janet Yellen cleared to head U.S. Federal Reserve
Top banker must reduce stimulus program without spooking Wall Street or Main Street
Janet Yellen won confirmation from the U.S. Senate on Monday to take the reins at the Federal Reserve, the country's central bank, as it seeks to delicately wind down its crisis-era stimulus.
Yellen will be the first woman to lead the central bank in its 100-year history.
The Senate voted 56-26 to approve the nomination. Yellen, 67, will succeed current Fed chair Ben Bernanke.
Bernanke ends his four-year term at the end of the month, but not before starting the process of tapering — reducing the monthly Fed bond-buying program to $75 billion from $85 billion US.
The generally favourable market reaction to Bernanke’s decision, made at the Fed’s December meeting, augers well for an orderly reduction in stimulus for the U.S. economy.
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The bond-buying program was meant to keep rates low and foster economic development and Yellen, a long-time supporter of Bernanke’s policies, is expected to continue the stimulus until there is a substantial recovery in U.S. employment.
Yellen has spent more than 20 years as an insider at the U.S. central bank, most recently as its vice chair.
Her every statement will henceforth be closely watched. She steps into the spotlight charged with the task of reducing the Fed stimulus program without spooking the markets or depressing economic growth.
Rates could rise in 2015
Observers don't expect interest rates to rise until early next year, but much depends on the performance of the U.S. economy.
Yellen is notable for her focus on the joblessness rate in the U.S., which was 7 per cent in November, a rate she has said is unacceptable. She also has spoken in favour of GDP and inflation targets.
Yellen is considered a "dove" who wants the Fed more focused on creating jobs because unemployment is high and inflation is low. "Hawks" on these issues prefer a stronger emphasis on preventing inflation.
Her critics have said the Fed has inflated stock and real estate prices by pumping money into the markets, creating investment bubbles that could burst and wound the economy anew.
An economist with ties to neither Wall Street nor academia, she is known for her reliable economic predictions – a boon as the U.S. economy appears to be on the mend.
The Commerce Department released a report Monday showing factory orders up 1.8 per cent for November, led by a surge in aircraft demand.
Businesses were stepping up spending on machinery, computers and other long-lasting goods, a sign of investment that could fuel economic growth and job creation.
Congress looks at unemployment benefits
The U.S. Congress was back in session today, with plans to debate a three-month extension of benefits for the long-term unemployed. That measure, if approved, could return benefits to about 1.3 million Americans who lost them Dec. 28 in the budget deal agreed to by the two political parties.
Its an election year and Democratic Congressman consider the measure vital to their core supporters.
The budget drama is not over. Lawmakers also face a Jan. 15 deadline to agree on a new spending bill to keep the government running.
With files from the Associated Press and Reuters