At a White House ceremony later today, Barack Obama will formally nominate her (some might say he's 'yellin' for Yellen'. MT wouldn't dream of it) to succeed her boss, Ben Bernanke, when he steps down in January, after his previous favourite, Larry Summers, dropped out of the race last month.
Yellen has apparently been nominated for her doveish attitude: in the past, she’s even gone as far as to suggest she wouldn’t mind if inflation briefly rose above the Fed’s target of 2% if it meant unemployment dropped faster.
She is also known as an architect of quantitative easing, and one of the main advocates of forward guidance: she helped to create the 6.5% unemployment threshold above which the Fed will not raise interest rates. That’s been copied all over the world, most recently by new Bank of England governor Mark Carney.
There are a number of hoops to jump through before she can be confirmed for the job. Her nomination will now go to the Senate, where Republicans, who are generally regarded as more hawkish than doveish (ie. they’re concerned about the impact of high inflation) would like the 0.25% interest rate to rise sooner rather than later. Ditto an end to quantitative easing, which Bernanke has been teasing the markets with, but hasn’t quite got around to committing to.
Even that shouldn’t create too many problems, though: a number of Republicans voted for her when she was named as vice-chair in 2010.
Although Bernanke has presided over the country during the worst economic crisis in living memory, Yellen’s task (her contract will run until 2018) won’t be easy: as it stands, the US has a 7.3% unemployment rate. And although by the time she takes over, the government should (touch wood) have resolved its twin debt ceiling and finance bill crises, she’ll still have all the repercussions of political in-fighting to deal with. Rather her than us…