Yellen, the current president of the San Francisco Federal Reserve Bank, is renowned as a monetary policy “heavyweight”.
He also nominated Sarah Raskin, Maryland’s financial regulation commissioner, and MIT economist Peter Diamond, who has written extensively about pensions and fiscal issues, to fill two open seats on the Fed’s seven-person board.
The trio, if approved by the Senate, would be taking their seats as the Fed faces the challenge of how to steer its way out of an unprecedented level of monetary stimulus.
In addition to slashing interest rates to near zero per cent in response to the 2008 financial crisis, the Fed undertook a host of emergency measures that some economists fear will stoke inflation in the future.
The three would also come on board as the Fed defends its regulatory capabilities and emergency powers before a sceptical Congress, which faults the central bank for lapses that contributed to the financial crisis.
Yellen, an experienced central banker known for her “dovish” stance that favours supporting economic growth over trying to protect against inflation, would replace Donald Kohn, a 40-year Fed veteran who is to retire from the Fed’s No. 2 spot on 23 June. She previously worked for President Bill Clinton as chair of the White House Council of Economic Advisers between 1997 and 1999.
If all three are approved by the Senate, as expected, they would bring the board, the epicentre of US monetary policy, to full strength for the first time in nearly four years.
Obama’s imprint on the central bank would be large if the three nominees take office. He last year named Daniel Tarullo, a regulatory expert, to the Fed’s Board of Governors and renominated Ben Bernanke to a second term.