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Senate approves Janet Yellen as Federal Reserve chair

6:31 PM, Jan 6, 2014   |    comments
Janet Yelle
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The Senate on Monday easily approved Janet Yellen's nomination to head the Federal Reserve.

The 56-26 vote makes Yellen the first woman to lead the central bank in its century-long history. It puts an economist in the post who has long focused on fighting unemployment and who backed the Fed's recent efforts to spur the economy with low interest rates and huge bond purchases.

Yellen begins her four-year term as chair on Feb. 1. She replaces Ben Bernanke, who has held the job for eight years dominated by the Great Recession and his efforts to fight it.

Yellen has been Fed vice chair since 2010.

Nominated in October by President Barack Obama, Yellen will be the first Fed chair picked by a Democrat since President Jimmy Carter chose Paul Volcker.  

A recent string of positive economic news could turn into a headache for Yellen as she takes the reins at the Federal Reserve.

She faces an immediate challenge that will test her communication and policy skills.

With gross domestic product growth above 4 percent and the stock market roaring along - save for Thursday's year-opening sell-off - the new central bank chief could have a harder time justifying the Fed's crisis-era monetary policy.

The Fed indeed does intend to ease the pace of its monthly asset purchase program - quantitative easing - from $85 billion to $75 billion, but the balance sheet will continue to grow, after ending 2013 at just more than $4 trillion.

Simultaneously, the Fed is holding its target funds rate near zero, a level it has maintained since the onset of the financial crisis in late 2008.

Ultimately, the early tone from Yellen is likely to be one of caution. Among the Fed's voices, she has been comparatively skeptical of the recovery's strength, particularly in terms of how much a shrinking labor force has been responsible for the unemployment rate's decline.

Yellen will preside over her first Fed meetings as chair on March 18 and 19. 

The Associated Press and CNBC's Jeff Cox contributed to this report.

NBC News

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