STEVE INSKEEP, HOST:
American women have served as senators, as speaker of the House, secretary of State, presidential candidates, but until President Obama chose Janet Yellen, no woman was ever nominated to be chairman of the Federal Reserve. It is among the rarest of political appointments. Since the 1970s there have been exactly three Fed chairmen: Paul Volcker, Alan Greeenspan, Ben Bernanke; that's it.
Today, Janet Yellen faces questions from senators who will vote on whether or not to confirm her. And though women's groups pushed for her choice, the questions today are liable to focus far less on who she is than the policies she would pursue. Lawmakers will ask if she's ready to fulfill both of the Fed's main jobs. Democrats want to know if she'll be focused on job creation, while at least some Republicans want to know if she will keep inflation in check. NPR's John Ydstie reports.
JOHN YDSTIE, BYLINE: Back in August, more than a third of Senate Democrats signed a letter to President Obama in support of Yellen, who is the current vice chair of the Federal Reserve. The letter was sent when it appeared the president might nominate former Treasury Secretary Larry Summers to the top Fed post instead of Yellen.
Iowa Senator Tom Harkin says a big reason he and other senators backed Yellen was her strong support for Fed stimulus policies aimed at reducing unemployment.
SENATOR TOM HARKIN: She's committed to that and I believe that she would be a Fed chair that would not only focus on price stability, but also focus on reducing unemployment.
YDSTIE: But some Republicans feel the Fed stimulus compromises the Fed's responsibility to keep inflation in check. Yellen will likely address those concerns by repeating something she said before.
JANET YELLEN: For many years since we put in place this extraordinary degree of accommodation starting around 2008, inflation has been persistently running at or under two percent.
YDSTIE: In fact, in recent years the Fed has been concerned that inflation is below its two percent target, concern Yellen repeated in the text of her opening statement to the banking committee released yesterday afternoon. That hasn't provided much reassurance for Republicans, so if Yellen wants to offer more evidence that she's not as dovish on inflation as some think, she could recount a session she had with former Fed chairman Alan Greenspan.
It happened when she was a Fed governor back in the last 1990s. As former Fed Governor Larry Meyer tells the story, both he and Yellen were concerned that with the economy strong and the unemployment rate low, there was a growing threat of inflation.
LAURENCE MEYER: We went to the chairman with that concern. Of course I'll say that the response was, nice to see you, have a good day, but the important point was that at that point, like myself, Janet was concerned about inflation and perhaps more concerned than most other members on the committee.
YDSTIE: Meyers says one challenge for Yellen is to be responsive, but not get trapped into providing a timetable for when Fed will start dialing back its $85 billion a month bond-buying program. The problem in providing a timetable is that removing the stimulus is dependent on the health of the economy. But, Meyer says, Yellen could remind the lawmakers that the Fed's forecast for next year is that the economy will improve enough to begin tapering.
MEYER: Clearly she can give the indication they are looking for the opportunity (unintelligible) the data will ultimately confirm their forecast. It hasn't yet.
YDSTIE: In the text of her opening statement, Yellen says supporting the recovery today is the surest path to returning to a more normal approach to monetary policy, suggesting she will strongly defend keeping the stimulus in place for now. Meyer says Yellen, who has seldom testified before Congress, will have a tough act to follow to match current chairman Ben Bernanke's communication skills.
But, he says, he expects Yellen is up to the challenge.
MEYER: Given how clear a thinker she is and how well she expresses her views, I think she'll do very well.
YDSTIE: The expectation is that Yellen's nomination will be approved by the Banking Committee and confirmed by the full Senate, despite threats by some Republicans to hold up her confirmation to get action on other issues. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.
