President Barack Obama`s official nomination of Janet Yellen as the next chair of the Federal Reserve was greeted with fevered activity from both the press and markets alike. The news marked a welcome change from coverage of the government shutdown impasse that has been dominating the headlines for the past week.
Over at Slate magazine, Matthew Yglesias gives us his pick of the Six Things You Should Know About Janet Yellen. Among them are the revelations that she will be the best-qualified Fed chair so far having been Chairman of the Council of Economic Advisers and President of the San Francisco Fed, and is now set to become the most important woman in economic policy in American history. She can also count among her attributes a rigorous interview technique, particularly when the interviewee in question is…herself.
While keenly aware of the historical significance of appointing a woman as Fed chair, Bloomberg’s Justin Wolfers and the New York Times’s Binyamin Appelbaum took a more personal approach in their profiles. Wolfers, a friend of Yellen and her Nobel laureate husband George Akerlof, notes that much of the discussion over her “dovish” credentials misses the critical point that “she has gotten the big calls right” throughout the crisis. Though we saw little of her reputed pugnacity in her acceptance speech, both writers mention the clarity and force with which the 67-year-old Brooklyn native makes her arguments. Appelbaum says her appointment could mark a clear cultural change at the Fed with Yellen “a more assertive leader than Bernanke and…less averse to conflict”.
In the background, however, there remains some lingering fallout from a difficult nomination process in which the two leading candidates became caught up in the current political maelstrom in Washington. Such was the ferocity of the debate that Democratic senators took the unusual step of petitioning the White House to block the nomination of Larry Summers, who was initially assumed to be Obama’s preferred candidate. Summers’s withdrawal from the race left the road clear for Yellen, an act that Sudeep Reddy of the Wall Street Journal argues the new Fed chair should acknowledge with a thank you note on her first day in office.
On the other side of the Atlantic the Telegraph’s Ambrose Evans-Pritchard, not known for his dovish sympathies, also cautiously welcomed the announcement. He praises Yellen’s confrontations both with previous Fed chair Alan Greenspan in the 1990s and New York Fed chief William Dudley in the lead-up to the financial crisis over what she strongly felt were policy missteps. Though Evans-Pritchard remains uncomfortable with the Fed’s use of its quantitative-easing programme to “pump up asset prices”, he accepts that, with Yellen at the helm, at least “we now know where we stand”.
With the Federal Reserve having to achieve a delicate balance between the gradual withdrawal from unconventional monetary policy measures while maintaining its support for the US recovery, the challenge Yellen will inherit is daunting. Set against the backdrop of a deeply divided Washington, the chair of the Fed has seldom been a more crucial or a more scrutinized role.
In her acceptance speech, Yellen made the stakes clear: “While we have made progress, we have farther to go. The mandate of the Federal Reserve is to serve all the American people and too many Americans still can’t find a job and worry how they’ll pay their bills and provide for their families. The Federal Reserve can help if it does its job effectively.”
Image: U.S. President Barack Obama looks on after announcing his nomination of Janet Yellen to head the Federal Reserve at the White House in Washington, October 9, 2013. REUTERS/Jonathan Ernst