Diminutive central banker is an able and resourceful figure

Janet Yellen, Mr Obama's nominee to be the next chairman of the Federal Reserve, will be the first female head of the US central bank and 15th chair, leading the bank through its centenary in December.

Taking over one of the most influential roles in the world economy, the Brooklyn-born academic economist and former adviser to former president Bill Clinton is the second woman to lead a central bank of a global power, following Elvira Nabiullina, who was appointed head of Russia's central bank in June. Ms Yellen will be the first Democrat to lead the Fed since Paul Volcker left the post in 1987.

Investors had largely banked on Ms Yellen (67), vice-chair of the Fed since 2010, landing the job since Larry Summers, Mr Obama's former economic adviser, withdrew his name last month in the face of opposition from Senate Democrats. Financial markets were largely subdued in response to news of Mr Obama's nominee to be American's top central banker, economist and financial regulator.

Regarded as a “dove” on monetary policy, Ms Yellen is likely to continue the Fed’s extraordinary stimulus of maintaining interest rates near zero and $85 billion a month of bond purchases aimed at driving down borrowing costs as the US tries to strengthen a fragile economic recovery.

The challenge for Ms Yellen is when to call time on the unconventional monetary policy that Ben Bernanke has used to steer the US out of the worst financial crisis since the Great Depression.

She must plan and communicate clearly a gradual exit from the policy without triggering a sharp increase in inflation. Ms Yellen has pushed for greater transparency regarding the Fed’s intentions and thinking.

Starting a four-year term, Ms Yellen will take over at the Fed at a time when the US economy is still plagued with a stubbornly high unemployment rate of 7.3 per cent, well above the 6.5 per cent rate over which the Fed has said it will not raise interest rates.

She has said that she favours strategies that would create jobs even if they threatened to drive inflation higher as she must juggle with the Fed’s dual and often conflicted mandate.

While her defence of Fed monetary policy is well known, her views on regulation are not as clear, though she has argued that markets benefit from strong supervision. This suggests that the diminutive central banker may be far tougher on America’s biggest banks than her predecessor.