Yellen’s run as U.S. Fed chief comes to an end
First woman in key position leaves after one term with U.S. economy in good shape
WASHINGTON— Even during her final news conference as chairperson of the U.S. Federal Reserve, Janet L. Yellen last month stuck to the careful approach that helped her guide the central bank through a pivotal period.
Asked if she was disappointed that her historic tenure as the first woman to lead the Fed was ending after just one term, she demurred. She brushed off a query about whether the Republican tax cuts were illtimed. She wouldn’t even bite on a lighthearted question about which black dot was hers on the quarterly chart of Fed policymakers’ interest rate forecasts.
“I’ve never been willing to reveal which dot is mine,” she said, smiling, “and I’m not going to change that now.” When Yellen steps down next month, she’ll depart with the economy in strong shape and monetary policy-makers armed with more options than they’ve had in years, should it falter.
But the soft-spoken former UC Berkeley economist also leaves some important unfinished business after an unusually short four-year stint as leader of the world’s most influential central bank.
While the nation has essentially returned to full employment under her watch, inflation remains stubbornly below the Fed’s annual 2 per cent target. That’s helped prevent faster wage growth and caused policy-makers to fret about the longer-term consequences for the economy.
Also, although Yellen shepherded the effort to begin unwinding the extraordinary and controversial steps the Fed took to fight the financial crisis and Great Recession a decade ago, she won’t be around to complete the complicated task. And she won’t be presiding over the institution as it begins weighing potentially far-reaching changes in how it handles monetary policy in an era of slower growth.
Despite widespread praise for her performance, U.S. President Donald Trump decided last fall not to renominate Yellen, a Democrat, for a second four-year term as chairwoman. Instead, he chose Fed governor Jerome H. Powell, a Republican who has been a loyal supporter of Yellen’s agenda. The decision broke with the recent precedent of presidents extending the terms of Fed chiefs originally nominated by predecessors from the other political party. For Yellen, 71, that means she’ll have had the shortest tenure for a Fed leader in nearly four decades.
“She wanted to continue,” said Princeton economist Alan Blinder, a former Fed vice chairperson and good friend of Yellen’s. “I think she always knew it was an uphill battle once Donald Trump got elected.”
With her term ending Feb. 3 — three days after leading her last monetary policy meeting in which no new action is expected — Yellen won’t have the chance to leave the kind of mark left by her recent predecessors.
Paul Volcker is known for taming high inflation in the 1980s. Alan Greenspan oversaw the longest U.S. economic expansion on record while chairperson for almost two decades, although the Fed under him also was blamed for the housing bubble that burst into the Great Recession. Ben S. Bernanke engineered the Fed’s aggressive response to the financial crisis and is credited with saving the nation from a second Depression.
“On the one hand, she didn’t have to deal with anything as difficult as Ben Bernanke did, not even close,” Blinder said. “But on the other hand, she handled the situation she got superbly.”
Said Donald Kohn, a senior fellow at the Brookings Institution think tank who was Fed vice chairperson from 2006 to 2010: “She’s been able to lead the committee in a way that’s avoided major financial disruption while beginning the rollback of unconventional monetary policy. I think that’s quite an accomplishment.”
By all accounts, Yellen is wrapping up a distinguished career at the Fed.
She had a 21⁄ 2- year stint as a Fed governor in the 1990s, then returned to Washington in 2010 to be Bernanke’s vice chairperson before succeeding him. In between, Yellen taught at Berkeley’s Haas School of Business, chaired the White House Council of Economic Advisers under former president Clinton, and served as president of the Federal Reserve Bank of San Francisco from 2004 to 2010, where she was involved in the Fed’s response to the financial crisis.
“I feel very positive about what we’ve been able to accomplish and feel tremendous . . . loyalty to the institution,” Yellen said in December at her last news conference as Fed chief.
She plans to continue living in the Washington area, where her husband, Nobel-prize winning economist George Akerlof, is a professor at Georgetown University. Like Bernanke, she’s likely to join a think tank, and could also write a book. The couple also will keep their home in Berkeley, she said.
“An underappreciated aspect of the Yellen Fed is how smoothly the transition from extraordinary monetary stimulus to policy normalization has proceeded,” said John Williams, president of the Federal Reserve Bank of San Francisco, in an email response to questions about her tenure. “This was not a foregone conclusion and it’s a testament to her leadership and preparation.”
Chris Rupkey, chief financial economist at MUFG Union Bank in New York, said Yellen may be remembered mostly for her short tenure.
“It ended abruptly,” he said. “She didn’t get a chance to make a difference in terms of putting policies and procedures in place.”