- By
- PETER NICHOLAS
- ,
- KRISTINA PETERSON
- and
- JON HILSENRATH
- CONNECT
Mr. Obama is expected to announce the nomination at 3 p.m. ET at the White House.
The nomination would conclude a long and unusually public debate about Mr. Obama's choice which started last June when he said that Ben Bernanke wouldn't be staying in the post after his term ends in January.
Mr. Obama gave serious consideration to his former economic adviser, Lawrence Summers, who pulled out in September after facing resistance from Democrats in the Senate.
The announcement comes in the middle of a building political crisis in Washington which complicates the backdrop for Senate confirmation hearings. The federal government has been partially shut since Oct. 1, after its spending authority expired. The U.S. Treasury estimates that by Oct. 17 it will be low on cash because a federal debt ceiling prevents it from borrowing more money.
Ms. Yellen's nomination would be subject to Senate confirmation amid angry squabbling between Democrats and Republicans over fiscal issues. The timetable for hearings and a vote is uncertain.
Ms. Yellen has been the Fed's second-in-command since 2010. From that perch, she's been a close adviser to Mr. Bernanke as he devised new easy money programs aimed at supporting economic growth.
Her nomination would mean the Fed is unlikely to make any unusual lurches in its interest-rate decisions in the near-term. But she would have a number of vexing challenges almost immediately.
Since last April the Fed has been trying to prepare investors for its eventual exit from an $85 billion-per-month bond buying program. Many investors thought it would take a first step toward winding down the program in September, but Mr. Bernanke decided to hold back amid signs of a soft job market and looming fiscal clashes.
The Fed still could take a first step toward winding down the program before Mr. Bernanke's term expires at the end of January. There are three policy meetings between now and then which he will run. But even if the Fed's takes a first step on Mr. Bernanke's watch, Ms. Yellen, who would take over in February if confirmed in a timely manner, would need to lead decisions about the pace of winding down the program.
Ms. Yellen has been a strong supporter and outspoken advocate of the Fed's easy-money efforts. With inflation running below its 2% target, the central bank can afford to keep the nation's credit spigots wide open to encourage economic growth and hiring, she has argued.
As chairwoman, she would lead a divided committee of 19 policy makers, a number of whom doubt whether the bond-buying program is doing much good and worry that the Fed portfolio of $3.5 trillion in Treasury and mortgage securities is getting dangerously large.
The Fed also has sought to boost the economy by holding short-term interest rates to near zero and pledging to keep them there until the jobless rate, which was 7.3% in August, falls to 6.5% or lower. Most Fed officials don't expect to move short-term rates until 2015.
Write to Peter Nicholas at [email protected], Kristina Peterson at [email protected] and Jon Hilsenrath at [email protected]
