Janet Yellen is now expected to succeed Ben Bernanke as chair of the US Federal Reserve, becoming the first woman to lead the Fed.
As Mr Bernanke's deputy for the past two years, she was widely seen as the most likely candidate after the surprise withdrawal of former Treasury Secretary Larry Summers from the race on 15 September.
President Barack Obama received a letter signed by 350 economists last month urging him to choose Ms Yellen, and she was the preferred candidate of many Senate Democrats.
The economists pointed to her early warning about the sub-prime mortgage crisis, democratic leadership style and commitment to job growth.
But she was not thought to be Mr Obama's favourite, having spent the financial crisis outside of his close circle of economic advisers.
Brooklyn-born Ms Yellen, 67, has a strong academic background, with firm connections to both of the highest-ranked Ivy League universities.
She received her PhD in economics from Yale in 1971 and went from there to be an assistant professor at Harvard until 1976.
Her first link to the US central bank came when she took up a job as an economist with the Fed's board of governors from 1977 to 1978.
After a further series of academic posts, she served as chair of the White House Council of Economic Advisers from 1997 to 1999, while former US President Bill Clinton was in office.
Financial markets generally preferred her over Mr Summers, because her approach was seen as being similar to Mr Bernanke's.
Investors believe that she will continue Mr Bernanke's extraordinary efforts to prop up the US economy longer than Mr Summers would have.
This is because she is thought to have a more relaxed attitude than Mr Summers to inflation, preferring instead to prioritise boosting employment by keeping rates lower for longer.
William Dudley, president of the New York Fed, said on 23 September that she was unlikely to make major policy changes.
He sid that he thought Ms Yellen's approach "would be very consistent with the monetary policy that we've had in the past".