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Obama’s choice for Fed chair optimistic

Janet Yellen says she will look to boost employment and strengthen the economy.

US Federal Reserve Vice Chair Janet Yellen. Picture: AFP

WASHINGTON - Federal Reserve Vice Chair Janet Yellen, President Barack Obama's pick to lead the US central bank, said on Wednesday that strengthening the economic recovery and boosting employment would be priorities if she is confirmed as Fed leader.

Yellen, an advocate of the central bank's aggressive actions to stimulate economic growth through low interest rates and large-scale bond purchases, would replace Fed Chairman Ben Bernanke, whose second term ends on January 31.

The nomination would put Yellen on course to be the first woman to lead the institution and the first to head a central bank in any Group of Seven industrial nation.

At a White House ceremony where Obama announced her nomination, Yellen said she would promote maximum employment, stable prices, and a sound financial system as the top US central banker and noted there was more to do to ensure people who were out of work could find jobs.

"While we have made progress, we have farther to go. The mandate of the Federal Reserve is to serve all the American people, and too many Americans still can't find a job and worry how they'll pay their bills and provide for their families," the 67-year-old former professor said.

Yellen will provide continuity with the policies the Bernanke-led Fed has pursued, and is likely to move cautiously in reining in the extensive monetary stimulus the central bank put in place to shore up the world's largest economy.

Despite such opposition, Yellen has strong support from fellow Democrats and is expected to be confirmed by the Senate.

"Janet is exceptionally well qualified for this role," Obama said with a beaming Yellen by his side. "She doesn't have a crystal ball, but what she does have is a keen understanding about how markets and the economy work, not just in theory but also in the real world. And she calls it like she sees it."

STABILITY

The US central bank has held interest rates near zero since late 2008. It has also roughly multiplied its balance sheet to about $3.7 trillion through three rounds of massive bond purchases to press down longer-term borrowing costs.

"Yellen's nomination is a clear signal that the highly accommodative monetary policy stance will likely remain in place," wrote Barclays economist Michael Gapen in New York.

The market reaction on Wednesday did not provide a clear read on investor sentiment, with Stocks closing modestly higher.

The US Treasury has warned it could run out of cash quickly to pay the nation's bills if lawmakers do not raise the government's $16.7 trillion debt ceiling soon.

Obama settled on Yellen after his former economic adviser Lawrence Summers withdrew from consideration in the face of fierce opposition within the president's own Democratic Party that raised questions about his chances of congressional confirmation.

With markets jittery about a potential US default, Obama appeared to want to provide reassurance with his words about Yellen. He noted her ability to reach consensus with colleagues - something Summers' opponents say he lacked - and her success at predicting the risks of a major recession before it happened.

"Given the urgent economic challenges facing our nation, I urge the Senate to confirm Janet without delay," Obama said. "I am absolutely confident that she will be an exceptional chair of the Federal Reserve."

Yellen's focus on efforts to boost growth has riled some Republican lawmakers who think the Fed has already pumped too much money into the economy.

The Republican opposition could lead to a tense hearing when Yellen goes before the Senate Banking Committee, which needs to weigh her nomination before sending it to the full Senate for a final confirming vote.

In the end, however, Yellen is expected to gain enough support to secure the 60 votes needed to overcome any procedural hurdles. Democrats control the chamber 54-46.

US jobless rate hits 6.5 percent, as long as inflation does not threaten to pierce 2.5 percent. The jobless rate stood at 7.3 percent in August.

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