By Alister Bull and Jonathan Spicer
WASHINGTON (Reuters) - Janet Yellen on Thursday robustly defended the Federal Reserve's bold steps to spur economic growth, calling efforts to boost hiring an "imperative" at a hearing into her nomination to become the first woman to lead the U.S. central bank.
Answering questions before the Senate Banking Committee, Yellen made plain she would press forward with the Fed's ultra-easy monetary policy until officials were confident a durable economic recovery was in place that could sustain job creation.
"I consider it imperative that we do what we can to promote a very strong recovery," Yellen, currently the Fed's vice chair, told the panel.
She said the Fed's bond-buying, which some Republican lawmakers fear risks stoking inflation or asset bubbles, could not continue forever, but made clear any decision to reduce the purchases, currently $85 billion a month, would be driven by incoming economic data.
The Fed has held interest rates near zero since late 2008 and has quadrupled its balance sheet to $3.8 trillion through three massive rounds of bond purchases, or quantitative easing. At its last meeting in October, it maintained its buying at the current pace, a policy known as quantitative easing, or QE.
Investors in stocks and bonds welcomed Yellen's commitment to drive a stronger recovery. U.S. stocks hit session highs as she testified, with the S&P 500 reaching a record high.
Nonetheless, analysts said she simply bolstered expectations that she would favor continuity with the policies of current Fed Chairman Ben Bernanke, whose term expires at the end of January.
"She hasn't given anything away specifically with regards to the timetable of any QE tapering," said Philip Shaw, chief economist at Investec in London. "It seems that policy remains driven by data for the time being."
Nominated by President Barack Obama in October to replace Bernanke when his term ends, Yellen is viewed as a policy dove and her emphasis on the high cost of unemployment reinforced that reputation.
The banking committee, where Obama's Democrats occupy 12 of the 22 seats, needs to vet her credentials to become the most powerful economic official in the world before sending her nomination to the full Senate for consideration.
Despite worries among some Republicans that she might not be tough enough on inflation, she is expected to win confirmation without drama. It is not yet clear when lawmakers will debate and vote on her nomination.
Obama's Democrats control 55 of the Senate's 100 seats, which means the 67-year-old former economics professor needs to only win backing from five Republicans to reach the 60-vote threshold necessary to overcome any procedural hurdles.
(Additional reporting by Emily Stephenson, Caren Bohan and Anna Yukhananov in Washington and Marius Zaharia in London; Editing by James Dalgleish)