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Obama picks Stanley Fischer for Fed vice chair

Former governor of the Bank of Israel Stanley Fischer addresses the Wall Street Journal CEO Council on November 19, 2013 in Washington, DC
Former governor of the Bank of Israel Stanley Fischer addresses the Wall Street Journal CEO Council on November 19, 2013 in Washington, DC

US President Barack Obama Friday nominated former Israeli central bank governor and renowned economist Stanley Fischer as vice chair of the Federal Reserve, completing a shakeup of the board's leadership.

The president also named former under secretary of the Treasury Lael Brainard to join the Fed board, and renominated current Fed governor Jerome Powell for a full term, setting up a full team for incoming chairwoman Janet Yellen.

Yellen, the current vice chair, will take over from outgoing Chairman Ben Bernanke on February 1, after her nomination was confirmed by the Senate last week.

Each of the new nominees will need Senate confirmation, and although all three are well-qualified and widely respected, congressional politics could end up slowing that process.

"These three distinguished individuals have the proven experience, judgment and deep knowledge of the financial system to serve at the Federal Reserve during this important time for our economy," Obama said.

Fischer, 70 and a dual US and Israeli citizen, is one of the world's most respected active monetary economists. He led Israel's central bank from 2005 to last year and before that held senior positions at the World Bank and the International Monetary Fund.

He was a professor of Bernanke, as well as European Central Bank chief Mario Draghi, at Massachusetts Institute of Technology. He was reportedly considered by the White House as a replacement for Bernanke.

"He is widely acknowledged as one of the world's leading and most experienced economic policy minds, and I'm grateful he has agreed to take on this new role," Obama said.

"I am confident that he and Janet Yellen will make a great team."

Brainard is well known abroad as she served as one of the president's top international economic advisers during a period of acute turbulence in the eurozone, during his first term.

Powell was a Treasury official in the former Republican administration of George HW Bush. He joined the Fed board in 2012 to fill an unfinished term that expires at the end of the month.

The nominations would bring the Fed board of governors up to a full complement of seven; one seat has been empty since August when governor Elizabeth Duke left.

But another current governor, Sarah Raskin, is also poised to depart. She was nominated by Obama last year as deputy secretary of the Treasury, and is awaiting Senate confirmation for that position.

The new lineup at the Fed takes charge at a complicated time for the US economy and Fed monetary policy. The central bank needs to balance reining in its stimulus and normalizing policy without reversing growth. At the same time, it needs to keep an eye on the possible threat of inflation from years of easy-money policies.

Hopes that the job market may be about to rocket higher after years of sluggish growth were dampened by a new Labor Department jobs report Friday showing only 74,000 new positions were created last month.

The disappointing data sparked speculation the Fed could be forced to slow a planned winding down of its stimulus program.

In December the Federal Open Market Committee, after months of discussion, decided to begin cutting back the $85 billion a month bond purchases by $10 billion, beginning this month, after seeing steady job creation and a significant drop last year in the jobless rate.

Fischer is seen as likely to fall in line behind the policies championed by Bernanke and Yellen, aimed at pushing down joblessness.

"Mr. Fischer is pragmatic and an activist on the policy front, as opposed to being overly dogmatic, and tends to respond quickly to changing economic circumstances," said Michael Gapen at Barclays.

Fischer "has generally supported the unconventional measures central banks have taken to arrest economic decline and support the recovery in developed economies following the onset of the crisis."

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