Fed chief hints she may not serve a second term
President Trump, who has criticized Janet L. Yellen, would need to renominate her.
WASHINGTON — Federal Reserve Chairwoman Janet L. Yellen may be seeing the writing on the wall: With President Trump’s mixed messages about her performance, the Fed leader indicated Wednesday that it “may well be” that she will not serve a second term.
Yellen’s tenure as Fed chair expires in early February, and she told lawmakers that she “absolutely” intends to serve out her term. Yellen did not directly answer a question about whether she was open to serving another four years should she be renominated by Trump.
“I really haven’t had to give further thought to this question,” she told the House Financial Services Committee on the first of two days of the Fed chair’s semiannual testimony to Congress.
Yellen was nominated to her post by President Obama, but the prior three Fed chairs all served more than one term after being renominated by a president from the opposing party.
On Wednesday, Yellen was asked the same question in a different way later by another lawmaker: Did she anticipate that this would be her last appearance before the House Financial Services Committee?
Yellen replied: “It may well be.”
Trump has not ruled out renominating Yellen, and at times he has spoken well of her, although he sharply criticized her stewardship of the Fed during the campaign. Speculation has swirled that Trump’s chief economic advisor, former Goldman Sachs head Gary Cohn, would be the top candidate to replace Yellen.
In her testimony Wednesday, Yellen said she expects the central bank to keep making gradual interest rate increases “to achieve and maintain maximum employment and stable prices.”
Yellen did not tip her hand on when the next rate hike would come. The Fed has raised its benchmark interest rate three times since December, to a range of 1% to 1.25%.
Inflation has been running well below the Fed’s 2% target in recent months, leading some analysts to argue that the policymakers should hold off on hiking rates or otherwise withdrawing monetary support for the economy.
Yellen has attributed the lower-than-expected reading on inflation partly to transitory factors, citing price drops in wireless service plans and prescription drugs. But she said those factors would drop out of the inflation calculation in coming months.
The Fed leader also did not shed more light on the timing of the Fed’s previously announced plans to shrink its $4.5-trillion holdings of U.S. Treasury and other securities, most of which were bought in response to the 2008 financial crisis in an effort to drive down long-term interest rates and stimulate the economy.
Yellen and her colleagues have said the Fed would begin winding down its portfolio of assets this year but haven’t specified when it would start. “Relatively soon,” she said Wednesday.
A shrinking of its balance sheet, like raising interest rates, is aimed at normalizing monetary policy and removing the extraordinary Fed support to the economy over the last decade.
Yellen’s remarks offered a fairly upbeat assessment of the U.S. economy. She said economic growth had rebounded after a sluggish first quarter, thanks to a pickup in household spending amid continued job gains and favorable consumer sentiment.
Business investment has turned up this year, she said, and stronger economic growth abroad has helped U.S. manufacturing and exports. She noted that the housing market also has continued to recover, albeit gradually.