WASHINGTON • Federal Reserve chairman Janet Yellen said she will step down from its board of governors once her successor is sworn into the office, widening the scope for President Donald Trump to shape the US central bank's leadership for years to come.
Mr Trump has nominated Mr Jerome Powell, 64, to replace Dr Yellen, 71, when her term ends in February, though his chairmanship is still subject to Senate confirmation. That move bucked a longstanding tradition of presidents reappointing their predecessor's Fed pick.
"As I prepare to leave the board, I am gratified that the financial system is much stronger than a decade ago, better able to withstand future bouts of instability and continue supporting the economic aspirations of American families and businesses," Dr Yellen, the first woman to lead the US central bank, wrote on Monday in her letter of resignation to Mr Trump.
Her decision to leave will give Mr Trump a fourth spot to fill on the Fed's seven-person board of governors in Washington, including a vice-chairman spot. The White House has said Mr Trump is focused on making a selection for that position this year.
"There is some degree of urgency," said Mr Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. "Four is problematic, three is probably not workable for very long, on the board there's just too much else to do aside from monetary policy."
Fed governors lead a number of internal working committees on areas including banking supervision, consumer affairs and the US payments system. Leaving seats unfilled for a prolonged period could slow progress on this work, while also diluting the number of votes that governors have on setting the US cost of borrowing. Five of the 12 regional Fed presidents vote on policy every year.
"You would think the administration would be eager to make its mark on the board," Mr Stanley said.
Dr Yellen has presided over almost four straight years of steady economic growth, sluggish inflation and a jobless rate that has fallen even as she directed the gradual exit from crisis-era policies. On her watch, the Fed halted a controversial bond-buying campaign, lifted interest rates off zero, and began to unwind its US$4.5 trillion (S$6.1 trillion) balance sheet.
Dr Yellen could have stayed on as a governor even after stepping down as Fed chairman, because her term as governor does not end until Jan 31, 2024, though such a decision would be unexpected.