(Bloomberg) — Janet Yellen won U.S. Senate confirmation to become the 15th chairman of the Federal Reserve and the first woman to head the central bank in its 100-year history.
Yellen, 67, was confirmed today by a 56-26 vote. She'll replace Ben S. Bernanke, whose second term as chairman expires Jan. 31, as the Fed trims monthly bond purchases in a first step toward lessening the unprecedented stimulus.
Currently Fed vice chairman, Yellen has backed Bernanke's efforts to steer the economy through its most severe crisis since the 1930s with record-low interest rates and three rounds of bond buying that have swelled Fed assets to $4.02 trillion. She pledged in a Nov. 14 confirmation hearing to press on with accommodation until achieving a "strong recovery."
"Americans should feel reassured that we will have her at the helm of the Fed as our nation continues to recover from the Great Recession," Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, said in a statement today. "Dr. Yellen's leadership will also be critical as the Fed completes Wall Street reform rulemakings and continues to enhance the stability of our financial sector."
Yellen's Senate opponents, including Charles Grassley of Iowa, cited her support for Bernanke's policies, which they say may create asset-price bubbles or lead to an inflationary surge even with prices rising below the Fed's 2 percent target. Consumer prices rose 0.9 percent in November from a year earlier, according to an inflation measure watched by the Fed.
'Misguided' policies
Grassley, a Republican, said he opposes Yellen's confirmation because he thinks she would continue Bernanke's "misguided" policies, adding that he was skeptical the Fed would unwind its stimulus efforts under her watch.
"The stock market has become addicted to the Fed's easy-money polices," Grassley said on the Senate floor today, adding that "the benefit to Main Street has been questionable at best."
The Federal Open Market Committee on Dec. 18 tapered monthly bond purchases to $75 billion from $85 billion, saying in a statement that "labor market conditions have shown further improvement."
The committee, scheduled to meet Jan. 28-29, probably will cut its purchases in $10 billion increments over the next seven meetings before ending them in December, according to a Bloomberg News survey of economists after the FOMC announced the reduction.
Economic recovery
The Fed says its bond-buying helped reduce unemployment to a five-year low of 7 percent in November. Bernanke backed the stimulus in a Jan. 3 speech, saying that "for the most part" academic research supports the conclusion that bond purchases and clearer communication from the Fed have "helped promote the recovery."
Bernanke also said headwinds that have held back the economy may be abating, leaving the U.S. poised for faster growth. "The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters," he said in Philadelphia.
