World Officials Give Janet Yellen the Thumbs Up

International finance officials on edge over mounting policy uncertainty in the U.S. expressed widespread relief over President Barack Obama’s nomination of Janet Yellen to be the next Federal Reserve chairman.

“I personally welcome very much” the nomination, said Ewald Nowotny, governor of the Austrian central bank. “She is one of the wisest [central bank] governors that we have seen on the world scene,” Mr. Nowotny said on the sidelines of meetings hosted by the International Monetary Fund and World Bank this week in Washington.

The gathering of economic policymakers from all over the world has been largely dominated by talk about the U.S. budget impasse that threatens the government’s ability to borrow and meet its financial obligations. Also high on the agenda were the global impacts of the Fed’s plans to start reining in its $85 billion-a-month bond buying program.

For many of the officials present, the process would be in a safe pair of hands if Ms. Yellen takes over the Fed when Chairman Ben Bernanke’s term ends in January.

“It has been a pleasure to work with Janet in her role as vice-chair of the Fed, and I greatly look forward to continuing to work together in her new capacity,” Bank of England Gov. Mark Carney said.

Mr. Carney and Ms. Yellen face similar challenges. The Fed and the BOE both cut their policy rates to near-zero and engaged in a massive stimulus effort in a bid to avoid a repeat of the Great Depression of the 1930s. With the U.S. and U.K. economies now recovering, it will likely fall to them to reverse those policies, a task many economists say is fraught with risk.

Some policymakers expressed the hope that Ms. Yellen would be able to improve the central bank’s communications. Colombia Finance Minister Mauricio Cardenas said that uncertainty over when the Fed will start reducing its bond purchases and at what pace has created turmoil in emerging markets. “She’s a person who inspires a lot of confidence,” Mr. Cardenas said. “We firmly believe there has to be a clear, predictable path with good information so that there are no scares in the marketplace, as we have seen this year.”

Yi Gang, deputy governor of the People’s Bank of China didn’t comment on Ms. Yellen’s nomination, but he too said that international markets need an “orderly, well-communicated tapering” of bond purchases by the Fed. China is the largest foreign holder of U.S. treasuries.

Canadian Finance Minister Jim Flaherty, an outspoken critic of the Fed’s bond-buying program, was reserved in his comments on Ms. Yellen. “The choice of the chairman of the reserve bank is the president’s choice. And he made his choice,” he said.

The policies of the U.S. central bank have an outsize impact on the global economy, yet analysts expect Ms. Yellen to focus on shoring up the U.S. economy without too much concern for spillover effects. “Stabilizing nominal [U.S.] growth is of net benefit irrespective of these spillovers,” said Adam Posen, president of the Peterson Institute for International Economics.