Yellen, a former UC Berkeley economics professor and San Francisco Federal Reserve Bank president, has a particular expertise in unemployment and labor markets. That's helpful for a Fed chair, given that the central bank's monetary policy is required by law to serve two ends: keeping prices stable and promoting full employment. She also brings credibility to the job of combating inflation, having been a strong advocate of the Fed's move to explicit targets for inflation. Those targets help manage the public expectations that can drive price and wage growth.
Not that there was much of a gap, if any, between Yellen's views on monetary policy and those of her chief rival for the nomination, former top
The crucial question for the Fed now is when to stop its extraordinary efforts to hold down longer-term interest rates. Critics, including some affiliated with the central bank itself, argue that it's past time for the Fed to stop buying bonds and adding to the $3.7 trillion pile of assets that it will eventually have to scale back severely. Continuing the easy money path for too long could fuel inflation or asset bubbles such as the one in housing that led to the last recession — a problem that Yellen warned about in 2005, although she didn't foresee how badly things would end. But reversing course too soon or swiftly has risks too, including higher interest rates, tight credit and a global economic slowdown.