The New Fed Chair: Not Much Different From the Old Fed Chair

Federal Reserve Board Chair Janet Yellen (C) poses with Rep. Maxine Rivers (D-CA), (L), and Rep. Carolyn Maloney (D-NY) at the conclusion of Yellen's testimony before a House Financial Services Committee on "Monetary Policy and the State of the Economy", on Capitol Hill, February 11, 2014, in Washington, DC. Yellen, the first female chair of the Federal Reserve Board, is making her first appearance before Congress since being named to replace former Fed Chairman Ben Bernanke.     
National Journal
Catherine Hollander
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Catherine Hollander
Feb. 11, 2014, 12:12 p.m.

Janet Yel­len lived up to her “con­tinu­ity can­did­ate” repu­ta­tion dur­ing her ex­tra-long pub­lic de­but as Fed­er­al Re­serve Board chair on Tues­day.

Yel­len an­nounced no ma­jor policy shifts in her testi­mony, which spanned six hours (in­clud­ing breaks), be­fore the House Fin­an­cial Ser­vices Com­mit­tee. “Not a lot of new ground was broken, but that was to be ex­pec­ted,” Richard Moody, chief eco­nom­ist at Re­gions Fin­an­cial, emailed around hour five.

Yel­len was, after all, the Fed’s No. 2 poli­cy­maker be­gin­ning in 2010. She had es­poused many of the same views as Chair­man Ben Bernanke in that role. So when the an­nounce­ment that Yel­len was Pres­id­ent Obama’s pick to suc­ceed Bernanke was made on Oct. 9, eco­nom­ists ex­pec­ted her to ap­proach the job with the same gen­er­al philo­sophy as her pre­de­cessor.

“Bey­ond speak­ing style, there was little dif­fer­en­ti­ation,” Brett Ry­an, vice pres­id­ent for U.S. eco­nom­ic re­search at Deutsche Bank, said in an email dur­ing her testi­mony. Even with that speak­ing style, marked by Yel­len’s Brook­lyn ac­cent, she de­ployed a num­ber of Bernanke-isms, not­ing for ex­ample, that mon­et­ary policy “is not a pan­acea” for the eco­nomy’s woes and that the dual man­date “has served us well,” fa­vor­ite ex­pres­sions of the Fed chief who de­par­ted on Jan. 31.

And like Bernanke, Yel­len ar­gued that pro­posed le­gis­la­tion to open up the Fed’s mon­et­ary policy de­cision to audits from the Gov­ern­ment Ac­count­ab­il­ity Of­fice would do more harm than good. Like Bernanke, she stressed that the Fed’s un­wind­ing of its bond-buy­ing pro­gram, which began in Decem­ber, is not on a pre-set course.

“I think that Janet Yel­len is well on her way to­ward ac­com­plish­ing her goal of nav­ig­at­ing a smooth trans­ition at the Fed,” Robert Dye, chief eco­nom­ist at Comer­ica Bank, emailed.

Deutsche Bank’s Ry­an saw a subtle dis­tinc­tion in how Yel­len de­scribed the Fed­er­al Re­serve’s loom­ing de­cision about rais­ing its bench­mark in­terest rate, which has been near zero since Decem­ber 2008. The Fed has said it would keep the rate low at least as long as un­em­ploy­ment is above 6.5 per­cent and the out­look for in­fla­tion is no high­er than 2.5 per­cent over the com­ing year or two. With the job­less rate at 6.6 per­cent as of last Fri­day’s em­ploy­ment re­port, eco­nom­ists were look­ing for clar­ity on how the cent­ral bank would make the call to raise rates.

“Cross­ing one of these thresholds will not auto­mat­ic­ally prompt an in­crease in the fed­er­al funds rate, but will in­stead in­dic­ate only that it had be­come ap­pro­pri­ate for the com­mit­tee to con­sider wheth­er the broad­er eco­nom­ic out­look would jus­ti­fy such an in­crease,” Yel­len said in her pre­pared testi­mony.

In ad­di­tion to be­ing not­able for its length, Yel­len’s testi­mony bore plenty of the hall­marks of a first day on the job. House Fin­an­cial Ser­vices Com­mit­tee Chair­man Jeb Hensarling, R-Texas, had to ask Yel­len to ad­just her mi­cro­phone a hand­ful of times. Some com­mit­tee mem­bers poin­ted out to the Fed chief where they were sit­ting, to help her know where to look while an­swer­ing their ques­tions. A man ap­proached Yel­len for an auto­graph dur­ing a break from the hear­ing. An­oth­er wo­man asked to have her photo taken with the new Fed chair, who is the first wo­man to lead the cent­ral bank in its 100-year his­tory.

Some of those first-day hall­marks ex­ten­ded bey­ond nav­ig­at­ing Room 2128 of the Ray­burn House Of­fice Build­ing or be­ing ap­proached by strangers. When asked about the Fin­an­cial Sta­bil­ity Over­sight Coun­cil, a group of reg­u­lat­ors con­vened by the Dodd-Frank Act to dis­cuss risks to the coun­try’s fin­an­cial sta­bil­ity, Yel­len noted that she had yet to at­tend a meet­ing.

It will take time be­fore any real dis­tinc­tions between Yel­len and her pre­de­cessor emerge. For now, Rep. Ed Per­lmut­ter, D-Colo., paid Yel­len a com­pli­ment after three hours of testi­mony that can only be seen as pos­it­ive in the Fed chair’s world of try­ing not to rattle mar­kets every time they speak. “[Bernanke] was very smart, very steady, and not very ex­cit­ing, and I want to say you’re fol­low­ing in his foot­steps,” Per­lmut­ter said.

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