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Obama Taps Yellen to Replace Fed Chief Bernanke


Mil Arcega


President Barack Obama has named Federal Reserve Vice Chairman Janet Yellen to head the U.S. central bank after Ben Bernanke steps down at the end of January. The US senate still has to confirm Yellen, but analysts believe she’s a safe choice to steer US monetary policy in troubled economic times.

She’s poised to become the first woman to head the U.S. central bank. And with more than a decade at the Federal Reserve, Janet Yellen may be one of the most qualified to run it.

President Obama described her as tough and effective.

“She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession. 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," said President Obama.

The 67-year-old economist is being tapped to take the reins of the U.S. central bank when Chairman Ben Bernanke steps down in January. She thanked the president for his trust in her and vowed to preserve the Federal Reserve’s mandate.

“If confirmed by the Senate, I pledge to do my utmost to keep that trust and meet the great responsibilities that Congress has entrusted to the Federal Reserve, to promote maximum employment, stable prices and a strong and stable financial system," said Yellen.

The president also heaped praise on Bernanke for providing a steady hand - through the worst financial crisis in decades.

“He has truly been a stabilizing force not just for our country but for the rest of the world," said Obama.

Under Bernanke’s leadership, the Fed cut short term interest rates to near zero and has kept long term rates at record lows with an $85 billion a month bond buying program.

Financial markets welcomed the Yellen nomination as a nod to continuity.

Former central bank official Joseph Gagnon says Yellen is likely to continue Bernanke’s policies.

“I don’t see big changes. I think they’re both rather collegial in terms of encouraging, trying to get consensus within a group as much as possible, so I think that will continue," said Gagnon.

Analysts expect an easy confirmation by the Democratic controlled Senate with help from moderate Republicans. But given the sharp partisan divide in Congress, economists say Yellen’s biggest challenges are yet to come.
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US Economists: Fed Will Cut Economic Stimulus

VOA News


U.S. economists are predicting that policy makers at Federal Reserve are on the verge of beginning to trim the economic stimulus measures they have used to boost the American economy from the depths of the 2009 recession.

Top officials of the U.S. central bank started a two-day meeting Tuesday in Washington to decide whether to reduce their $85-billion-a-month purchase of securities to pump more money into the economy. One leading American economist, Jim O'Sullivan of High Frequency Economics, said he expects the Fed to cut the asset purchases by $10 billion a month.

"All signs at this point suggest that they will start tapering, and start winding down the purchase program. Of course, right now they're buying $85 billion per month in securities, so they'll start pulling that number down, probably not by a huge amount," said O'Sullivan. "I'm guessing they'll clip it to maybe $75 billion a month from $85 billion. So they're certainly not tightening at this point, but they're going to at least slow down the rate of easing."

Another economist, Mark Vitner of the large Wells Fargo Bank, said the U.S. economy, the world's largest, is advancing, even if it is not fully recovered from the country's worst economic downturn since the Great Depression of the 1930s. He said that with improvement in the economy, the central bank is looking to shrink its role as a spur to economic growth.

"I think they very much want to begin to normalize monetary policy. And right now it's exceptionally easy, even though the economy, you have a hard time saying that it's exceptionally weak. It's not strong, not strong by any stretch of the imagination, but it's strengthening, and it's moving in the right direction. It's time that monetary policy begins to do the same thing," said Vitner.

Even with the improvement of the U.S. economy, job growth has been sluggish in recent months, and some workers have given up their search for employment. The country's jobless rate has dipped to 7.3 percent - the lowest since late 2008, but still well above the historical norm of less than 6 percent.

The country's stock markets have recovered from the recession, though, with major indexes near all-time highs. Major corporations have been reporting hefty profits.

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