Head of the Fed: Janet Yellen is not just more of the same

To characterise Yellen as simply a safe pair of hands is to mistake the circumstances in which she takes up her post

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The Independent Online

At first glance, the most striking aspect of Janet Yellen’s nomination to the chairmanship of the US Federal Reserve is, of course, her gender. Central banking is even more male-dominated than politics and business – hardly models of diversity themselves. Assuming Ms Yellen’s formal recommendation by Barack Obama next week is ratified by the Senate, she will become the first woman ever to lead the Fed when she takes over from Ben Bernanke in January. The symbolism of the appointment, particularly as it comes just months after Elvira Nabiullina took over at Russia’s central bank, is not to be gainsaid.

Gender aside, however, Ms Yellen looks to be the least radical choice available to President Obama. She is less mercurial than the brilliant but abrasive Lawrence Summers – her main rival until he ruled himself out of the running last month – and she has near unrivalled economic expertise. Furthermore, as Mr Bernanke’s deputy since 2010, she is fully wedded to the Fed’s doveish stance, has been involved since the start in extraordinary policies such as quantitative easing, and has spearheaded further tweaks such as “forward guidance”.

In the immediate future, then, Ms Yellen’s appointment seems set to mean more of the same, perhaps communicated slightly more effectively. But to characterise her as simply a safe pair of hands is to mistake the circumstances in which she takes up her post. The merest suggestion that the US might begin “tapering” its $85bn-a-month bond-buying programme was enough to set emerging-market currencies plummeting. It will take unusual skill – and also some luck – to wean the US off its stimulus without causing chaos.

If the steps taken to prop up the economy have taken the US into uncharted territory, so too will their withdrawal. Even more so if the current stand-off in Washington leads to a once-unthinkable default on its bonds. Ms Yellen is the safe option. And she needs to be.