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Yellen to become first Chairwoman of the Federal Reserve

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Yellen to become first Chairwoman of the Federal Reserve

President Barrack Obama will nominate Janet Yellen to the leadership role of the Federal Reserve, making her the first woman to ever head the world’s most powerful central bank. Currently serving as the Vice Chairman of the Federal Reserve, Yellen brings with her decades of experience, and will be relied upon to steer the United States economy toward stability in 2014 and beyond.

Yellen will replace current Fed Chairman Ben Bernanke, who is wrapping up his second term as leader of the central bank. Bernanke led the US through its worst recession since the Great Depression. His term comes to an end January 31, 2014.

Yellen became the frontrunner for the job after former Treasury Secretary Lawrence Summers unexpectedly backed out of the race several weeks ago. According to Bloomberg, economists expected Obama to nominate Summers before he withdrew his name from consideration. Sources now say he was forced out of the race by Democrats on the Senate Banking Committee.

What do we know about Janet Yellen? Market participants often describe her as more of a dove than even Bernanke, due to her Keynesian leanings and overarching support for monetary easing. Like a prototypical Keynesian, Yellen’s primary concern is unemployment, not inflation, making her less likely to support high interest rates. However, it is widely acknowledged Yellen’s course of action will depend largely on the state of the US economy. She will be relied upon to see the Federal Reserve through the unwinding of record stimulus, which has injected more than $3.5 trillion into the US economy since 2009.

It is widely expected the Fed will begin scaling back monetary easing this year, although the timetable has been pushed back. Bernanke will head the next three Federal Open Market Committee policy meetings before Yellen takes over. Bernanke has described the Fed’s reluctance to taper monthly asset purchases as a result of weak jobs growth. As part of its forward guidance policy, the Fed has announced it plans to keep interest rates at record low levels until the unemployment rate reaches 6.5 percent.

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