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Janet Yellen confirmation marks new era at Federal Reserve

The Janet Yellen confirmation breaks a glass ceiling for women at the Federal Reserve and also comes at a time when the nation's central bank is under intense scrutiny.

Janet Yellen won a confirmation vote in the US Senate Monday, setting her on track to become the next Federal Reserve chair and to guide the central bank鈥檚 policymaking through a new and challenging economic era.

She鈥檒l be the first woman ever to hold the job. She鈥檚 also viewed as unusually well prepared for the role, having served on the Fed鈥檚 governing board, heading one of its regional banks and, most recently, serving in the No. 2 seat next to outgoing Chairman Ben Bernanke.

But when Vice Chair Yellen takes the reins later this month, it won鈥檛 be a time for resting on her accomplishments.

The nation鈥檚 unemployment rate stands at a 7 percent, down from its post-recession peak but still an uncomfortably high level affecting millions of US workers.

The Fed, meanwhile, has ballooned its portfolio of bond assets to some $4 trillion in an effort to support the economy鈥檚 recovery by adding downward pressure on long-term interest rates. It also brought short-term interest rates to historic lows near zero percent.

Yellen was confirmed with a 56-to-26 Senate vote early Monday evening, with the substantial number of 鈥渘o鈥� votes,听symbolizing how the Fed鈥檚 role has come in for greater scrutiny and criticism in recent years.

Where many economists say the Fed鈥檚 efforts did much to steer the economy out of recession, the US central bank is not particularly popular with the American public.

Yellen鈥檚 task, as many economists see it, is to navigate a careful and gradual transition 鈥� keeping pressure on the monetary throttle to help the job market get back to normal, while also setting the stage for the Fed鈥檚 own monetary policy to get back to normal, too.

It may go smoothly. For now, labor conditions are improving, US stock indexes have been finding record highs, and inflation is modest. But there鈥檚 no guarantee, and the route ahead looks more difficult than what the Fed tries to chart in more typical times.

Yellen鈥檚 job will also be, in part, to try to build the Fed鈥檚 brand as an institution serving all Americans, not just power brokers on Wall Street or in Washington.

When senators held a hearing on the Yellen nomination back in November, she left little doubt that she sees her first mission as continuing to promote healthy growth.

鈥淯nemployment is 鈥� still too high, reflecting a labor market and economy performing far short of their potential,鈥� she said in her prepared testimony. 鈥淚 believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.鈥�

That more normal approach by the Fed would include higher short-term interest rates (perhaps starting some time in 2015), gradually winding down a campaign of monthly bond purchases (something the Fed just began to do at its December policy meeting), and ultimately shrinking the Fed鈥檚 bond portfolio.

At the same time, another key to providing a stable economic climate has nothing to do with interest rates or 鈥渜uantitative easing鈥� (the bond purchases). Rather, it has to do with regulating and supervising financial firms.

Yellen and her colleagues at the Fed are part of a new oversight system, put in place after 2008, designed to guard against a new financial crisis in the banking system.

President Obama said Monday evening that his nominee is up to this job of fostering a stable financial system, and that she鈥檒l strike a sound balance in monetary policy.

鈥淛anet is committed to the Fed鈥檚 dual mandate of keeping inflation in check while also addressing our most important economic challenge by reducing unemployment and creating jobs,鈥� Mr. Obama said in a statement issued by the White House.

Some Republicans have voiced worry that the Fed鈥檚 policies will open the door to a resurgence of inflation or promote price bubbles in assets like stocks or real estate.

On the left, support for Yellen has been solid (she鈥檚 a Democrat). 听And some Republicans joined Democrats in supporting her nomination on a day when a number of senators were absent.

Yellen grew up in New York's Brooklyn borough and taught for years at the University of California, Berkeley, before taking a succession of policy roles at the Fed.

Neera Tanden, president of the Center for American Progress in Washington, said in a statement released after the confirmation vote that 鈥渁s the first woman to run the Federal Reserve, Janet is breaking yet another glass ceiling in an arena full of gender barriers.鈥�