Janet Yellen set to succeed Ben Bernanke as US Fed chief, markets relieved

Federal Reserve number two Janet Yellen is set to be nominated by US President Barack Obama on Wednesday to run the world's most influential central bank, providing some relief to markets that would expect her to tread carefully in winding down economic stimulus.

The nomination will put Yellen on course to be the first woman to lead the institution in its 100-year history.

The advocate for aggressive action to stimulate US economic growth through low interest rates and large-scale bond purchases would replace Ben Bernanke, whose second term as Fed chairman expires on January 31.

If confirmed by the US Senate, which is expected to endorse her, she would provide continuity with the policies the Fed has established under Bernanke. Analysts say she would move cautiously in reining in policies in place to shore up the world's largest economy.

Expectations that the Fed might start to taper its stimulus program have roiled financial markets since May and the central bank shocked investors in September by maintaining its cash injections of $85 billion a month in full.

"Thank God Yellen will be nominated under the current circumstances. You don't want a change at the central bank right now," said Dan Fuss, a portfolio manager at Loomis Sayles in Boston. "This Yellen news is one uncertainty lifted from already nervous markets."

Her nomination would come during a political stalemate in Washington that has closed the US government and threatened a US default if lawmakers fail to raise the $16.7 trillion debt ceiling by an October 17 deadline.

US stock index futures rose and the dollar slipped on the news of Yellen's pending nomination. The debt standoff is fueling expectations the Fed may delay any plans to reduce its stimulus for now.

If confirmed, she would join the Fed's honor roll along with such household names as Paul Volcker and Alan Greenspan, predecessors as head of an institution that can influence the course of the world economy.

"I believe she'll be confirmed by a wide margin," said Senator Charles Schumer, a Democrat from New York.

Described as a "good egg" by fellow Fed policymaker Richard Fisher and a "very able person" by Japan's Chief Cabinet Secretary Yoshihide Suga, her most immediate challenge may be to determine when the Fed should scale back its bond buying.

After September's surprise decision against tapering, many economists now think the Fed will not move until Bernanke has left office.

Obama turned to Yellen, 67, after his former economic adviser Lawrence Summers withdrew from consideration in the face of fierce opposition from within the president's own Democratic Party, raising questions about his chances of congressional confirmation.

The contest between Summers and Yellen played out all summer in a public way not usually associated with the selection of the top US central banker.

Obama is scheduled to announce his nomination at the White House at 3 pm EDT (1900 GMT), a White House official said on Tuesday. Bernanke is expected to attend.