US President Barack Obama will nominate Federal Reserve Vice Chairwoman Janet Yellen to be the next head of the US central bank on Wednesday, putting her on course to be the first woman to lead the institution in its 100-year history.
If confirmed, Yellen would replace Ben Bernanke, whose current term as head of the Fed ends in January.
Obama is due to make the announcement at the White House at 3 p.m. (21:00 South African time).
US SENATOR JACK REED, DEMOCRAT, RHODE ISLAND:
“I applaud President Obama for making this smart and historic nomination of Janet Yellen to lead the Fed. She is a strong voice for promoting full employment and is supremely qualified for the job. Ms. Yellen deserves to be confirmed with strong bipartisan support.”
ROBBERT VAN BATENBURG, DIRECTOR OF MARKET STRATEGY, NEWEDGE USA LLC, NEW YORK:
“The timing is a little surprising, but the nomination is not with the disappearance of Larry Summers as the leading candidate. The bond market likes to see continuity with this Fed, which has been favourable to it. I think it could be two to three months to the nominee through the process. So we should see her confirmed in December. Under normal circumstances, this news would be dollar bearish and stocks and commodities bullish. Now we have all the cross-currents especially from Washington. It's not clear how markets will react. The markets are much more concerned about the 'drop dead date' on the debt ceiling.”
GUY LEBAS, CHIEF FIXED INCOME STRATEGIST, JANNEY MONTGOMERY SCOTT, PHILADELPHIA:
“A Yellen nomination as Fed chairman will provide to the short to medium part of the yield curve. We could see the three to five year part of the curve to rally a bit. She is perceived as dovish. She is also a great economist with a great deal of experience. It might be a slow nomination process, but we have a Senate that should be friendly to her nomination.”
DAVID R. KOTOK, CHAIRMAN AND CHIEF INVESTMENT OFFICER, CUMBERLAND ADVISORS, SARASOTA, FLORIDA:
“Janet Yellen's forthcoming nomination will be greeted well by market agents. It should be. They will assume a continuation of the Bernanke policy. They will also assume gradualism when it comes to Fed tapering which is now likely to be delayed because of the budget, debt-limit fight's damage to the US economy. The US economic recovery is losing steam daily.
“Yellen is highly skilled, seasoned and a veteran of the financial crisis. She certainly does not want another one to occur on her watch as chair of the Federal Reserve.
“Any market calming effect will be short lived. Markets are focused on the political fight and are also sensitive to the damage each day of the political fight does to the US economy. Yellen knows this. She cannot do anything about it except to proceed slowly on any tapering policy.
“So Fed policy becomes more predictable with the announcement of her appointment while Congress and the White House continue to add fuel to the fire that burns the modern day version of Rome which we call Washington.
“We remain with a cash reserve on the sidelines. We like Janet Yellen and wish her well. She cannot fix the dysfunction at the other side of the Washington where the congressional fight with White House continues.”
LARRY MILSTEIN, HEAD OF US GOVERNMENT AND AGENCY TRADING, R.W. PRESSPRICH & CO., NEW YORK:
“Yellen was still the majority pick and whom the market wanted. She's in line with what Bernanke has been doing especially with asset purchases. She is a known dove so we should expect status quo with her view on monetary policy. Probably any reduction in asset purchases would be a gradual one. Her nomination should be positive at least in the short term for the rates and bond markets. We are not going to see a huge rally with the problems in Washington. She does lean to the left. She might get some questions from Republicans. But I don't see any problems with her nomination.”
CHRIS RUPKEY, MANAGING DIRECTOR AND CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO-MITSUBISHI UFJ, NEW YORK:
“Many were a little afraid that the man who made this policy will not be here to see the game through to the end. This is no damn game, but we are getting the next best thing. The architect of the Fed's policies will be the one devising the exit strategy. We used to say the Fed chairman was the second most important man in the world. No more. Yellen has been nominated to be the head of the central bank, only the fourth since the 70s. Long live the Queen.”
DIANE GARNICK, FOUNDER, CLEAR ALTERNATIVES, NEW YORK:
“With the Federal Reserve facing one of the most important periods in history, Janet Yellen is a great choice. Her experience with the Council of Economic Advisors coupled with her academic prowess make her an optimal choice to guide the US economy through a period of rising rates.
“Many Americans remain concerned over the continuing high unemployment rate. Yellen's focus on the labor market could bring a much needed relief as tapering this year becomes rising rates in the ensuing years.”
ERIC STEIN, PORTFOLIO MANAGER, EATON VANCE, BOSTON:
“I think this been expected by the market (since Summers pulled out) though the fact that President Obama took this long to announce her led some to believe that he was thinking about announcing someone else like Don Kohn.
“I think equity markets will rally (and S&P futures are up a little) and the dollar will sell off somewhat based on this announcement as she is certainly very dovish.
“However you may not see huge reactions in markets as her nomination was already basically priced into markets and you have so much noise coming out of Washington that will markets in different directions completely independently of the news of her impending nomination.”
DAN FUSS, VICE CHAIRMAN AND SENIOR PORTFOLIO MANAGER OF LOOMIS SAYLES, BOSTON:
“Thank God Yellen will be nominated under the current circumstances. You don't want a change at the central bank right now. And when it comes to qualifications, Janet Yellen is an outstanding person for the post. My guess is this is a good thing for the Treasury market. The markets were acting very sick today. People were going on the sidelines, so this Yellen news is one uncertainty lifted from already nervous markets.”
US SENATOR BOB CORKER, REPUBLICAN, TENNESSEE:
“I voted against Vice Chairman Yellen's original nomination to the Fed in 2010 because of her dovish views on monetary policy. We will closely examine her record since that time, but I am not aware of anything that demonstrates her views have changed.”
SCOTT SPERLING, CO-PRESIDENT OF THOMAS H. LEE PARTNERS, NEW YORK:
“I think she is an exceptionally capable individual, whose vast experience at the Fed will be helpful at this point in time. Our economic recovery has been disappointing, it is a good thing that we have been on the positive side but it remains weak and fragile.
“Given the turmoil in Washington, which is the result of some combination of ineptitude and intolerance, it will be good to have somebody at the Fed who is mindful that one of their key missions is to sustain growth.”
TIM DUY, PROFESSOR, DEPT. OF ECONOMICS, UNIVERSITY OF OREGON, EUGENE, OREGON:
“Coming to the job with a wealth of experience in economic policy, she is by far the best candidate in the field, and her focus on communications comes at a time when the Federal Reserve very much needs someone to put the “guidance” back into “forward guidance.”
BONNIE BAHA, HEAD OF GLOBAL DEVELOPED CREDIT AT DOUBLELINE CAPITAL LP, LOS ANGELES:
“I think it's fair to say that the anxiety level in the markets has elevated materially over the last several trading sessions. The announcement of the Yellen nomination is far from random and should have a calming effect on global capital markets. The escalating rhetoric between Obama and Congress has the potential to spiral out of control quickly given the looming debt ceiling deadline. With at least one major uncertainty removed the hope must be that this announcement buys some time for all parties involved with respect to the ongoing budget debate.”
ROBERTO PERLI, CORNERSTONE MACRO, WASHINGTON:
“I think markets will receive the news well (aside from the fiscal debacle). It resolves an important uncertainty as to the direction of the Fed, and points overall to a market-friendly Fed, in the sense that premature removal of policy accommodation becomes now less likely. In terms of communication style I see Yellen as more likely to be upfront about her own views than Bernanke is, to be less of a consensus seeker at all costs, to defer less to the FOMC consensus, and to produce clearer communication as a result.”
MICHAEL S. HANSON, SENIOR ECONOMIST, BOFA MERRILL LYNCH GLOBAL RESEARCH, NEW YORK:
“Not surprised. With all the fiscal issues currently before the Senate, confirmation may not be complete until later November or early December. Means continuity in Fed policy going forward. Market will discover over time that she isn't the perma-dove that some have suggested, but easy policy will remain in place for some time - as the Bernanke Fed has already indicated.”
JOHN BRYNJOLFSSON, CIO OF ARMORED WOLF, ORANGE COUNTY, CALIFORNIA:
“With betting odds stacked 85 percent in her favour, hardly a surprise. Her reputation is one of emphasising the dual mandate, and within the dual mandate, fostering full employment, so is more dovish than Bernanke.
“While hawks fear that this dovishness risks inflating bubbles, paradoxically Yellen's reputation for more than cordial collaboration may mean the Fed fully airs hawks' concerns before voting on policy, and suggests (Bernanke's) grand plan of making the Fed a more process-based institution than a personality-based institution, may be the result.”
ANNETTE BEACHER, HEAD OF ASIA-PACIFIC RESEARCH, TD SECURITIES, SINGAPORE:
“The markets are loving it is what I can say. The US dollar has weakened appropriately. Our base case is that if Yellen is now in the race - although this needs to be approved by the Senate - it delays the potential for tapering.
“If Yellen is confirmed, it's more likely that tapering won't be until March at the earliest. From a financial markets perspective everyone is comfortable with the Yellen nomination. She's certainly well-known, she's certainly well-known to be dovish so this is extremely good for risk assets, it should be good for equities, it should be good for emerging markets. It's a risk-positive piece of news for the otherwise ongoing US government deadlock.”
CRAIG JAMES, CHIEF ECONOMIST, COMMONWEALTH SECURITIES, SYDNEY:
“The view is that Janet Yellen would basically follow similar policies as Ben Bernanke, which means that she's going to taper or wind back stimulus only slowly over time. That suggests that the US dollar is going to remain relatively low. We've seen reaction in financial markets today where both the euro and Aussie dollar have spiked somewhat higher.
“It's still a case that it's more speculative rather than anything else, but if the confirmation does go through as widely perceived then it's going to be a case of business as usual for the Federal Reserve. It's just a case of handing the baton from the chairman to the vice chairman, so that's comforting for the global economy, comforting for financial markets, that you've got continuity at one of the most important organisations in the world.”
BRAD DELONG, PROFESSOR, UNIVERSITY OF CALIFORNIA, BERKELEY:
“I do not think any chair nominee ever has been better prepared to take the job than Janet Yellen is right now. And I think it is good that she is so prepared. If Obama does nominate her in the Senate does confirm her, she will face challenges of the same order of magnitude that Paul Volker and Marriner Eccles faced. It is news that does make me sleep easier.”
TOHRU SASAKI, HEAD OF JAPAN RATES & FX RESEARCH, JPMORGAN, TOKYO:
“The nomination of Yellen is not as surprising because (Lawrence) Summers already retreated from the race. The market has been thinking the most possible candidate is Yellen, so it shouldn't be a big surprise.
“In addition to that, the market focus has been on the budget side ... It's not going to have a significant impact on the market.”
PETER CARDILLO, CHIEF MARKET ECONOMIST AT ROCKWELL GLOBAL CAPITAL, NEW YORK:
“I don't think it's going to be a surprise to the market. Obviously it certainly coincides with the release of the Fed minutes at a time when uncertainty in the markets is climbing. It's not earth-shattering news, but certainly it suggests that the Fed is going to continue with a dovish policy.”
“I'm calling for them to perhaps begin scaling back slightly in December but a lot of that depends on the outcome of the Washington shutdown and above all the debt ceiling. But based on pure economics and a slight decline in GDP due to the government shutdown, I think that puts them on hold until December. If the impact of the Washington shutdown weighs more heavily on the economy, that could push it back until the first quarter of 2014. In terms of raising rates, we'll still have a dovish attitude from the Fed.”
US SENATOR TIM JOHNSON, DEMOCRAT, SOUTH DAKOTA:
“I commend President Obama on his selection of Dr. Yellen to be the first woman to serve as Federal Reserve Chairman. She has a depth of experience that is second to none, and I have no doubt she will be an excellent Federal Reserve Chairman. In addition to having more than a decade's worth of experience working on monetary policy at the Federal Reserve, Dr. Yellen has also worked at the White House as Chairman of the Council of Economic Advisors and taught at some of world's most prestigious universities. I will work with Ranking Member (Mike) Crapo and the rest of the members of the Banking Committee to move her nomination forward in a timely manner.”
MATT MCCORMICK, PORTFOLIO MANAGER AT BAHL & GAYNOR INVESTMENT COUNSEL, WITH $9.6 BLN OF ASSETS UNDER MGMT, CINCINNATI, OHIO:
“The market will be mildly pleased, but most of this is already baked into the cake. She uses the same playbook as Bernanke, and the market should not expect any change to the status quo. She's viewed as a dove, and with the turmoil in the market lifting longer-term yields recently and the Fed's admission that an uptick in rates has hit the economy, she'll stay dovish. Markets may move up a little bit on this news, but then that will be overwhelmed by the debt ceiling negotiations.”
US SENATOR JEFF MERKLEY, DEMOCRAT, OREGON:
“We need a Federal Reserve Chair who is both qualified and experienced, and who would look at policy-making through the lens of what's best for the middle class. Janet Yellen is exactly that. She's been one of the strongest voices on the Federal Reserve Board for job creation and the middle class and has been consistently correct in her economic predictions. Her experience as Vice Chair, and previously as President of the San Francisco Federal Reserve, makes her an incredibly qualified nominee. - Reuters