By Alister Bull
WASHINGTON (Reuters) - Janet Yellen, President Barack Obama's nominee to lead the U.S. Federal Reserve, will offer a stout defense on Thursday of the central bank's aggressive monetary easing before a Senate panel that includes some tough Republican critics.
At a Senate Banking Committee hearing on her nomination to be the first woman to run the nation's central bank, Yellen is likely to remain vague on future Fed actions.
But she will look to head off calls for the Fed to back away from its muscular efforts to spur stronger economic growth and lower unemployment.
"I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy," Yellen, the Fed's current vice chair, will tell the panel, according to prepared remarks released late on Wednesday.
The hearing is scheduled to start at 10 a.m. (1500 GMT).
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Her words bolstered expectations the central bank would push on with its bond-buying stimulus into next year and move cautiously when it seeks to temper its support for the economy.
President Barack Obama nominated Yellen last month to replace Fed chief Ben Bernanke when his term expires on January 31.
CONFIRMATION EXPECTED
The banking committee, where Obama's Democrats occupy 12 of the 22 seats, will vet her credentials to become the most powerful official in the U.S. and world economy, before sending her nomination to the full Senate for consideration.
Despite criticism, she is expected to win confirmation without drama, although it is not yet clear when lawmakers will debate and vote on the merits of her selection.
Obama's Democrats control 55 of the Senate's 100 seats, which means the 67-year-old former economics professor need only win backing from five Republicans to reach the 60-vote threshold necessary to overcome Senate procedural hurdles.
U.S. growth picked up in the third quarter, but is expected to struggle in the final three months of the year after consumer and business confidence was dented by a bitter partisan budget battle in Washington.
As a result, the Fed has maintained a controversial bond buying program, while holding interest rates near zero, and Yellen's remarks bolstered views she would preserve policy continuity with Bernanke.
POLICY DOVE
Calling the U.S. unemployment rate of 7.3 percent in October too high, she noted the economy and labor markets were performing "far short" of their potential, while inflation was under the Fed's 2 percent goal and expected to stay there for some time.
"Our country has come a long way since the dark days of the financial crisis, but we have farther to go. Likewise, I believe the Federal Reserve has made significant progress toward its goals, but has more work to do," she said.
Financial markets have long viewed Yellen as a policy dove more concerned about the high level of unemployment than about the risk that the Fed's efforts to spur stronger growth might lead to an unwanted rise in inflation.
The Fed has held interest rates near zero since late 2008 and has quadrupled its balance sheet to around $3.8 trillion through three massive bond-buying campaigns aimed at holding down long-term borrowing costs to boost growth and jobs.
It is buying $85 billion in bonds per month.
Critics worry that this monetary largesse could stoke future inflation and fuel asset bubbles as investors are driven into riskier assets in the hunt for higher returns.
Yellen's testimony, which represents her first public remarks on Fed policy since June 2, will be scrutinized for signs of how she feels about the costs and benefits of continued bond buying.
But analysts expect her to be very careful not to give any clues ahead of the Fed's December 17-18 meeting, although her stress on the need for stimulus reinforced expectations the central bank would not scale back its purchases until next year. (Reporting By Alister Bull. Editing by Andre Grenon)