“A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.”
That is what Janet Yellen, nominee to succeed Ben Bernanke as Federal Reserve chairman, will say in prepared remarks to the Senate Banking Committee at a confirmation hearing on November 14. (Read her full speech here.) Bernanke will step down as chairman at the end of January.
Yellen, as most of us know by now, has a a PhD from Yale, and has taught economics at University of California, Berkeley, Harvard University and the London School of Economics. Her husband, George Akerlof, is a pretty nifty economist too: he won the Nobel prize for economics in 2001 for asymmetrical information.
Here’s some other stuff that you need to know about the Federal Reserve’s first female chairman-in-waiting:
One, Yellen is a known dove (a supporter of continuing monetary stimulus) and her speech confirms that. She notes that the U.S. economy seems to be on the mend, but much more needs to be done before the Federal Reserve can back off and pull the plug on monetary stimulus.
Two, the statements seem to hint that Fed tapering (winding-down of stimulus) may be some time away, which should gladden financial markets around the world.
Three, under her watch, the Federal Reserve will continue to pay greater attention to financial stability along with its conventional twin mandates — achieving stable prices and maximum employment.
Today’s hearing is expected to give the world more insight into the person who will lead the world’s most influential central bank. Nevertheless, American media do not expect Yellen, who has extensive policy-making experience, to make any controversial or market-rattling statements during the hearing. At most, be prepared to hear middle-of-the-road statements that don’t deviate from her main message in the speech, which is that the Fed will continue to support the economy with everything that it’s got.