Market Watchers Are Cheering the Yellen Nomination (Mostly)

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Federal Reserve

Today at 3 PM, President Obama officially announced his decision to nominate Janet Yellen to be the 15th Federal Reserve Chair. If she is confirmed, she will be the first woman in the role. Wall Street is growing increasingly worried about the government shutdown and a possible government default, but market watchers took time out from reading the shutdown tea leaves in order to digest the implications of a Yellen chairmanship. Here’s what they are saying:

1. She’s arguably the most qualified candidate to be nominated for the position. Anne Richards, Chief Investment Officer at Aberdeen Asset Management writes in an email:

“An immensely capable economist, Janet Yellen, the current Vice Chair of the Fed, has more Fed experience than Volcker, Bernanke and Greenspan, having served on the Fed board of governors from 1994 to 1997 and led the San Francisco Federal Reserve from 2004 to 2010.”

2. Since the financial crisis, Yellen has played a pivotal role in helping Ben Bernanke craft some of the innovative policies he used to combat the financial crisis. Yellen’s nomination represents a vote for stability and continuity at the Federal Reserve, something most market participants are eager for. As Dan Fuss, a portfolio manager at Loomis Sayles in Boston told Reuters

“Thank God Yellen will be nominated under the current circumstances. You don’t want a change at the central bank right now . . . This Yellen news is one uncertainty lifted from already nervous markets.”

(MORE: 5 Things Everybody Should Know About Janet Yellen)

3. Integral to this stability and continuity is showing a similar willingness as Bernanke to use uncommon tactics to fight high unemployment while inflation remains low. Justin Wolfers, an economist and Senior Fellow at the Brookings Institution writes:

“Yellen’s appointment should be viewed as an investment in the Fed’s dual mandate, which emphasizes the central bank’s role in taming both unemployment and inflation. The unemployed should rejoice that they have a powerful advocate willing to battle the hard-money types willing to consign them to the economic scrap heap.”

4. Despite years of consistently low inflation and high unemployment, there remain those afraid that Yellen’s  commitment to accommodative monetary policy will eventually lead to higher inflation. Macroeconomic research firm Capital Economics wrote in an email:

“At this stage, Yellen is unquestionably the best candidate. But there is a slightly bigger risk that under her stewardship, the Fed will fail to tighten monetary policy in time once the recovery gathers momentum, eventually triggering an unwanted surge in inflation.”

5. Which is Why some Republicans will surely fight the nomination. Senator Bob Corker, who sits on the Banking Committee and who has been critical of current monetary policy, said in a statement:

“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,”

6. But Republicans will actually be powerless to stop Yellen taking over at the Fed. Chris Kreuger, analyst at Guggenheim Partners writes in a research note:

“On the eve of primary election filing deadlines, the threat of Tea Party challenges could force otherwise supportive Senate Republicans to object to any Fed nominee . . . Obama’s trump card is that Yellen becomes Acting Chairman on February 1 when Bernanke’s term expires by virtue of the fact that she is Vice Chair — the GOP can’t really block her.”