The US Senate has confirmed Janet Yellen as the new head of the powerful US Federal Reserve. However she is not expected to change the Fed's policy of cheap money.
The head of the US Federal Reserve is the most important job in the financial world. The Fed decides the interest rate for the US dollar, the world's leading currency, and is a significant influence on the markets' money supply. It's an office with great power and even greater responsibility.
For the first time in its 100-year history, that post has gone to a woman. Janet Yellen, with a doctorate in economics, has taken over from current Fed Chairman Ben Bernanke. Some journalists have commented on how the financial world is being run by three influential woman. With German Chancellor Angela Merkel, IMF Chairman Christine Lagarde and now Yellen, there are "three women who influence the markets," wrote the German news agency dpa.
That may be correct, but isn't actually that relevant. Not much is expected to change with Yellen in charge. After all, she has been the Fed's vice-chair for more than three years and therefore acts as Bernanke's deputy.
Business as usual
"Yellen represents the monetary policy that the Fed has pursued for several years," said Nils Jannsen, an expert on the US at the Kiel Institute for the World Economy. "She backs a very expansive monetary policy that focuses mainly on the development of the labor market."
Those who focus on combating unemployment are known in the financial world as doves, as opposed to the hawks who focus on battling inflation. These categories have nothing to do with the gender - Bernanke is also known as a dove.
Contrary to the former Deutsche Bundesbank, which concentrated on monetary stability, and also the European Central Bank, the Fed is not just bound to monetary stability.
"The Federal Reserve has a dual mandate", said Dietmar Rieg, CEO at the German American Chamber of Commerce in New York. "It should focus on price stability as well as full employment."
With the current US unemployment rate at a relatively high 7.3 percent, Rieg does not expect to see any changes in the Fed's monetary policy.
Where doves and hawks meet
In any case, the Fed's monetary policy is not decided by its chair but by the Federal Open Market Committee (FOMC), seven Fed governors and five regional presidents who regularly meet to decide on interest rates and the acquisition of bonds, to provide the markets with money.
As vice-chair, and before that as president of the Fed branch in San Francisco, Yellen has been a voting member of the FOMC since 2009. Both doves and hawks are represented at the council. The hawks aim to leave the policy of cheap money behind as soon as possible.
"The critical voices in the FOMC are gaining ground," said Jannsen. "However, the appointment of Yellen is a clear signal that the exit will take place sooner rather than later."
Top priority: employment
Yellen's initial nomination was positively received by the financial markets - no surprise, as the policy of cheap money stimulates the stock markets. But eventually, Yellen will need to change the Fed's monetary policy, said Gertrud Traud, chief economist at the Landesbank Hessen-Thüringen. "Yellen will have to carefully move in this new direction, since she wants to be sure that the economy and the increase in employment figures does not stall."
There are also no doubts about Yellen's professional qualifications. Before becoming vice-chair of the Fed, the 67-year-old was a lecturer at several renowned US universities. She was also an adviser to President Bill Clinton and headed a regional central bank. And Yellen's interest in economics follows her home: she is married to George Akerlof, winner of the Nobel Prize in Economic Sciences in 2001.