US President Barack Obama has nominated Janet Yellen to be the next chair of the Federal Reserve Board.
He described her as a proven leader who knows how to build consensus in managing the Fed's dual mandate of controlling inflation and increasing employment.
At a White House event, Mr Obama also paid tribute to current chair Ben Bernanke, whose term on the board ends in January.
Mr Obama urged the Senate to confirm Ms Yellen as soon as possible.
Mr Obama called Mr Bernanke a voice of wisdom during a time of market volatility who helped repair the US economy from the worst recession since the Great Depression.
Analysts said that the markets will be pleased with the choice of Ms Yellen, saying that she uses the same playbook as Mr Bernanke, and the market should not expect any change to the status quo.
Mr Obama turned to Ms Yellen after his former economic adviser Lawrence Summers withdrew from consideration amid fierce opposition from within the president's own Democratic Party, raising questions about his chances of congressional confirmation.
In contrast, Ms Yellen has enjoyed strong support from Democrats.
In an unusual move, 20 Senate Democrats signed a letter earlier this year pressing Mr Obama to turn to the former professor from the University of California at Berkeley.
Her backing on the Republican side of the aisle is much softer.
Many Republicans worry the Fed's policy of holding overnight interest rates at zero and the massive bond purchases it has pursued to drive other borrowing costs lower threaten to create asset bubbles and spark an unwanted rise in inflation.
A respected economist whose research has taken her deep into theories of monetary policy, Ms Yellen has earned a reputation as one of the Fed officials most worried about unemployment and least concerned about inflation.
"With employment so far from its maximum level and with inflation running below the committee's 2% objective, I believe it's appropriate for progress in the labour market to take centre stage in the conduct of monetary policy," she said in March.
Ms Yellen studied economics at Yale University and taught at Berkeley for more than a decade before her first stint as a Fed board governor from 1994 to 1997, a post she left to head for Us President Bill Clinton's Council of Economic Advisers.
She later served as president of the San Francisco Federal Reserve Bank, where her first-hand view of the overheated property market helped her see the dangers of the housing bubble earlier than many of her colleagues.
Ms Yellen has been central to moving the Fed toward more clarity and precision in its communications, an openness that she sees as the key to an effective monetary policy.
She led a panel of officials who rewrote the Fed's rules on communications and helped convince her colleagues to adopt an explicit inflation target for the first time last year.
Ms Yellen, who has long argued that the Fed should tolerate slightly higher inflation if that is the cost of fighting high unemployment, has never dissented on a Fed policy decision.
But she also has not shied away from advocating rate rises if she feels the situation calls for it.
In 1996, after then-Fed Chairman Alan Greenspan had repeatedly put off raising rates, she and a colleague went to him to argue that the Fed was at risk of courting inflation.
Her most immediate challenge may be to determine when the Fed should scale back its $85 billion per month bond-buying programme.
Financial markets had expected the Fed to taper the purchases in September, but it did not and now many economists think it might not move until Mr Bernanke has left office.
Its controversial bond purchases have put the Fed on track to buy some $3 trillion in mortgage and Treasury debt.
The easy money was aimed at digging the US labour market out of the deep hole caused by the 2007-2009 recession.
While it pushed US borrowing costs to record lows and sent US stocks to record highs, the loose policy also fueled resentment in some emerging markets, who had to contend with a flood of hot money as investors sought higher returns.
Now the flood gates are reversing. The mere mention by Mr Bernanke in May that the Fed could soon begin to ease up on its monthly purchases sent global financial markets reeling and US borrowing costs sharply higher.
Currencies and equities in many emerging markets plunged, underscoring the delicate task Ms Yellen would face.
Despite the Fed's aggressive efforts to prop up the economy, growth has been lacklustre and the labour market is still sickly.