Janet Yellen poised to lead the Fed?

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ScreenHunter_06 Sep. 18 09.16

By Leith van Onselen

From Bloomberg comes a report that Professor Janet Yellen, who has been president and chief executive officer of the San Francisco Fed since June 2004, is poised to take over the chair of the Federal Reserve once Ben Bernanke’s term expires in January 2014:

Janet Yellen is overwhelmingly seen as likely to be nominated as chairman of the Federal Reserve to succeed Ben S. Bernanke, according to a Bloomberg survey of economists.

Fifty-six of 65 economists in the survey, or 86 percent, said President Barack Obama is likely to pick Yellen, the Fed’s vice chairman. The survey was taken yesterday and today, after former Treasury Secretary Lawrence Summers withdrew from contention…

Yellen has won the endorsement of 20 senators in the Democratic caucus, led by Sherrod Brown of Ohio, who wrote a letter to the president saying that she is “the best person for this job.”

She has also won the public support of many of her fellow economists. More than 450 of them have signed a letter arguing that she is “superbly qualified” and “the best possible leader for the Federal Reserve Board at this critical time in our nation’s history.”

Assuming the surveyed economists are correct, and Professor Yellen gets the nod, the question then becomes: what sort of Fed Chairman would she make?

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The Wall Street Journal (WSJ) published an interesting primer last night on Yellen, which backs suggestions that she is likely to be highly supportive of stimulatory policies, suggesting that the program to taper quantitative easing could stall under her watch, which is likely to please markets:

Ms. Yellen has been a reliable supporter of Fed Chairman Ben Bernanke‘s policies. She is frequently cited by economists as one of the central bank’s most dovish policymakers, generally backing policies that would boost growth and reduce high unemployment. She has long been a counterweight to the Fed’s more hawkish regional bank presidents who tend to be more concerned about rising inflation…

Ms. Yellen, in her most recent speech, defended the Fed’s near-zero interest rate target. “Such accommodative policy is appropriate, in my view, because the economy is operating well below its potential and inflation is undesirably low. I believe this is not the time to be removing monetary stimulus.”

President Obama is expected to announce the new Fed chair sometime “in the fall”.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.