UPDATE 4-Yellen takes big step toward becoming next Fed chair
* Senate banking panel approves nomination on 14-8 vote
* Full Senate expected to confirm Yellen in post in December
* Confirmation path became clearer with Senate rule change
* Three Republicans vote in her favor, one Democrat against
WASHINGTON, Nov 21 (Reuters) - Federal Reserve Vice Chair Janet Yellen moved closer on Thursday to becoming the first woman to lead the U.S. central bank after a Senate committee backed her nomination and the chamber changed its rules to make it easier for nominees to be confirmed.
Once she wins Senate approval, Yellen will replace Fed Chairman Ben Bernanke when his term expires on Jan. 31 and become the most powerful woman in world finance.
Her nomination moved easily through the Senate Banking Committee on a 14-8 vote. It now goes to the full Senate, which is expected to grant its approval next month.
Yellen, 67, was already widely expected to win confirmation, but her path became even clearer when Senate Democrats forced through a rule change that lowered the votes needed to overcome procedural roadblocks on most presidential appointments to 51 from 60. Democrats control 55 of the chamber's 100 seats.
Nominated by President Barack Obama, Yellen is viewed as a monetary policy dove more concerned about the costs to society of high unemployment than about the risk aggressive actions to lower it will ignite inflation or fuel asset bubbles.
The highly acclaimed economist will preside over a central bank that has taken dramatic and unconventional steps to spur economic growth, and which is now wrestling with a decision on when to scale back a bond-buying program that has sought to drive down long-term interest rates.
The Fed has held overnight rates near zero since late 2008 and has quadrupled the size of its balance sheet to $3.9 trillion through three massive asset purchase campaigns. It is currently buying $85 billion in bonds a month.
Both Yellen and Bernanke have emphasized in recent days that the Fed will keep interest rates low for some time even after it winds down its asset purchases, remarks that have bolstered expectations of policy continuity at the central bank.
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Minutes of the Fed's October meeting released on Wednesday showed policymakers were debating how best to enhance their forward guidance on when they might raise rates to help temper any economically disruptive moves in financial markets once they do start to ease back on purchases.
The Fed has said it would not push rates higher before the U.S. jobless rate falls to 6.5 percent, as long as inflation looked set to stay below 2.5 percent. Unemployment stood at 7.3 percent in October.
When Bernanke first broached the possibility of a near-term reduction in the asset purchases in May and June, he sparked a bout of global financial market turmoil that sent bond yields soaring and hit emerging markets hard.
The Fed's aggressive actions have drawn fire from Republican lawmakers worried about the risk of inflation and asset bubbles. Many Republicans also complain the central bank has abetted big spending by the Obama administration by snapping up the bulk of new Treasury debt issuance.
In the end, three Republicans on the banking committee supported Yellen. One Democrat voted no.
"The long-term costs of these policies are unclear and frankly worrisome," the committee's top Republican, Senator Michael Crapo, said.
Even before the Senate rule change, Yellen appeared on track to win the 60 votes needed to overcome any procedural hurdles.
In addition to the three committee Republicans who supported her - Bob Corker of Tennessee, Tom Coburn of Oklahoma and Mark Kirk of Illinois - Republican Senators Susan Collins of Maine and Lindsey Graham of South Carolina had also indicated they were inclined to back her.
The Democrat who voted against her in committee was Joe Manchin of West Virginia. He said in a statement that he was "greatly troubled" by the Fed's bond-buying campaign and that Yellen had shown no inclination to limit the program.
Before being named by Obama to be the Fed's No. 2 official in 2010, Yellen was president of the San Francisco Federal Reserve Bank. She had also served on the Fed's board in the 1990s and was a top economic adviser to President Bill Clinton.
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