Janet Yellen as Fed chairman: What stamp would she put on 'taper' question?
Janet Yellen is to be nominated as the next Federal Reserve chairman Wednesday afternoon. The nomination amplifies questions about when and how the central bank will pare back its massive efforts to stimulate economic growth.
President Obama’s nomination of Janet Yellen to be the next Federal Reserve chairman is being greeted as a reassuring step – a signal of continuity and competence at the helm of America’s central bank during difficult times.Skip to next paragraph
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Ms. Yellen is a longtime Fed policymaker, and she has been an ally of current Chairman Ben Bernanke on key decisions designed to promote growth in a weak economy.
But the nomination also amplifies questions about when and how the Fed will taper or pare back its massive efforts to stimulate economic growth in the wake of an unusually deep recession. Tightening policy too soon could hurt a fragile world economy, but waiting too long could raise the risk of inflation – and the risk of a Fed poorly positioned to deal with that inflationary pressure.
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Mr. Obama’s choice of Yellen follows several months of public vetting of prospective job candidates. The other main name considered was the more controversial Larry Summers, a former economic official in both the Obama and Clinton presidencies.
Yellen, unlike Summers, has spent a large chunk of her career at the Fed. And on the so-called taper question, she appears closely aligned with Mr. Bernanke’s caution about removing quantitative easing (a Fed bond-buying program) when there may be doubts about the economy’s forward momentum.
Investors generally welcomed the choice of Yellen, with its implied continuity in Fed direction. Stock prices and the US dollar rose modestly as Wednesday trading opened, despite a storm in Congress over the budget and national debt limit.
Yet the Yellen nomination, to be formally announced Wednesday afternoon, also signals the dawn of a new era at the Fed, ripe with the prospect of policy changes that could have important effects on the economy in the United States and worldwide.
That’s partly just the nature of job turnover. Each Fed chairman puts his or her own stamp on the course of policy, regardless of whether the individual has served in the shadow of another Fed chief. Remember, Bernanke was a Fed governor under Alan Greenspan, and then he ended up taking policy in significant new directions. Speaking of “his or her,” it’s worth noting that Yellen, if confirmed by the US Senate, will be the first woman to lead America’s central bank.