Yellen's delicate balancing act as Fed chief
It is now formally confirmed. On February 1 Janet Yellen, 67, will become the first woman to chair the US Federal Reserve. Her endorsement by the US Senate was never in doubt. What set it apart more than her gender was that she was confirmed with the least support on record. The reasons include the absence of some senators delayed by weather disruption of flights. But the vote also reflects a number of other challenging factors that will help shape her legacy. They include debate over the wisdom of the Fed's unconventional monetary policy with which she is strongly identified personally and through her support for retiring chairman Ben Bernanke; and the polarisation of American politics marked by the decline of bipartisanship and consensus. An example of this is that whereas Bernanke's initial nomination eight years ago was confirmed on the voices, without a formal vote, his reconfirmation in 2010 was not only put to a vote but the 70-30 result is the highest opposition to a Fed chairman on record, and now his successor has the lowest support.
Known for her commitment to fighting unemployment, Yellen will continue Bernanke's efforts to boost the US economy. The policy challenge lies in uncharted territory ahead as the central bank continues to taper its extraordinary stimulus measure - a US$75 billion-a-month bond-buying programme aimed at keeping interest rates low to spur the housing market and consumer spending. Known as quantitative easing, it has pushed the Fed's balance sheet close to US$4 trillion since stimulus efforts began in the wake of the 2008-09 financial crisis, which prompted some conservative Republican senators to criticise Yellen's nomination.
Although the Fed has already announced a planned cut from US$85 billion a month to US$75 billion in the bond-buying that has pushed up asset prices globally, the task of continuing to rein it in without unsettling financial markets falls to Yellen and the Open Market Committee she will chair. Markets will be hoping she maintains her reputation among Fed officials for accurate economic predictions.