Janet Yellen: The first Fed chairwoman

Janet Yellen

Her appointment is groundbreaking, but the policies of the most powerful central bank in the world are unlikely to change radically.

It's because Janet Yellen has been the deputy to Federal Reserve chairman Ben Bernanke since 2010 and served in various capacities as a Fed governor and chair of President Clinton's Council of Economic Advisers (CEA) since 1994.

The CEA is the body that the most prominent academic economists in the country sit on to advise the US President.

In other words, she is highly qualified, long-serving, and well-regarded. With the withdrawal of Larry Summers, few other candidates would have rivalled her economic expertise, which is internationally respected, as well as have the experience to be able to work effectively within a large organisation such as the Federal Reserve.


Crucially, in terms of policies, she was one of the proponents of the Fed's "forward guidance" policy that explicitly considers both sides of its dual mandate: to keep inflation in check and also to support employment.

This is the pledge to keep interest rates low until the unemployment rate falls to 6.5%, so long as inflation doesn't breach the 2% target by too much - so not rising above 2.5%.

Until the financial crisis, the Fed, like other central banks, essentially focused on keeping inflation in check. To do that required keeping an eye on economic growth and unemployment, of course.

But, the Fed's second target wasn't in focus until Bernanke and Yellen as his deputy crafted a new set of policies, which I wrote about before, that explicitly aimed to bring down unemployment.

This came as the US faced its third so-called jobless recovery, where the economy regained all of the lost ground since the recession but employment did not.

So although Yellen's appointment would make history, being the first woman to head the most powerful central bank in the world, her policies are unlikely to be a radical departure from Bernanke in the near term.

For those waiting to see what would happen regarding the Fed's tapering of its cheap cash injections, her appointment probably doesn't change the picture that dramatically if she takes over from Bernanke at the end of January.

As I said on the Today programme, it may depend on whether Bernanke wants tapering as his final act or perhaps leave it to his successor.

Face it, it may be a bit rough exiting the monetary stimulus that has been in place for five years.

Symbolic impact

Also, the symbolic impact of a female central bank governor should not be underestimated.

Her appointment would feature prominently in the debate over the lack of high ranking women in central banking and other prominent positions.

For instance, there are no female central bankers in the Bank of England or the European Central Bank at present.

Around the world, fewer than 10% of the 177 central bank governors are women. As the US Congress looks likely to confirm her appointment, Janet Yellen would join this small coterie:

Mercedes Marco del Pont of Argentina; Jeanette Semeleer of Aruba; Wendy Craigg of the Bahamas; Nadezhda Ermakova of Belarus; Linah Mohohlo of Botswana; Maria Mondragon de Villar of Honduras; Zina Asankojoeva of Kyrgyz Republic; Rets'elisitsoe Adelaide Matlanyane of Lesotho; Zeti Akhtar Aziz of Malaysia; Elvira Nabiullina of Russia; Atalina Emma Ainuu-Enari of Samoa; Maria do Carmo Silveira of Sao Tome e Principe; Jorgovanka Tabaković of Serbia; Caroline Abel of Seychelles; Gill Marcus of South Africa; Joyce Cocker Mafi of Tonga; Edmee Betancourt of Venezuela.

Finally, Yellen is married to someone who has received the highest prize awarded in economics, Nobel Laureate George Akerlof.

She and Akerlof have co-authored papers and both taught at the University of California at Berkeley and other places. Their son is also an academic teaching economics at the University of Warwick in the UK.

Her confirmation would mean that Akerlof may be the only Economics Laureate who is the lesser known half in their household.

Linda Yueh Article written by Linda Yueh Linda Yueh Chief business correspondent

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  • Comment number 20.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 19.

    WHO? Ms Yellen, I thought she has retired

  • rate this

    Comment number 18.

    Perhaps now the men have printed enough money they just need a lady for the laundering.

  • rate this

    Comment number 17.

    Only proves that the Fed can print money in both sexes

  • rate this

    Comment number 16.

    Ms Yueh, Since you are on the 'symbolic track', you failed to mention Dr Shamshad Akhtar the first female Governor of the central bank of Pakistan. She served from 2005-2008 and is currently Assistant Secretary-General for Economic and Social Affairs, with United Nations Secy General Ban Ki Moon.

  • rate this

    Comment number 15.

    Is it really necessary to constantly ram down our throats the fact that she has female parts? Thatcher was never this needy...
    I agree that she is the most qualified of the remaining candidates but it really should be left at that. Identity politics does no one any favours

  • rate this

    Comment number 14.

    It is a pity she can't bring some sense to the Republican tea party idiots who seem intent on plunging the world into another crisis.
    I think even the best brain in the world would find this difficult.

  • rate this

    Comment number 13.

    It looks as if Obama wants the financial skills of the Akerlof family and the PR gains of putting a woman in charge.
    Clever, but will not solve the deadly crisis now looming just over the horizon!

  • rate this

    Comment number 12.

    Unfortunately the banks don’t really understand that misuse of this responsibility inevitably results in “Boom and Bust”. They create, through their sheer greed, excess money when things look good and destroy it again as they “shrink their balance sheets” when it all goes pear-shaped! And this at the very time when the economy requires support - hence the need for QE.

  • rate this

    Comment number 11.

    The US, UK and others have chosen to create laws that "sub-contract" money creation to the private sector (the banks) and in return the governments must pay interest to the banks to use the "sovereign" currency.
    Banks and other supporters of this "sub-contracting process" claim that the government is paying for the service provided by the banks because it is a way of controlling inflation.

  • rate this

    Comment number 10.

    Ms Yellen
    good luck with possibly the toughest job in the world at the present time.
    no men are willing to take it on.

  • rate this

    Comment number 9.

    A country which is monetarily sovereign like the United States (and UK, Japan, China, India, Brazil, Russia) has monetary operational functions available to it but not available to countries which cannot create their own currency such as the 17 member countries of the eurozone. Any country that is sovereign in its own currency can create money without creating debt at any time it so chooses.

  • rate this

    Comment number 8.

    7. Peter

    Actually, capitalism has gone, mutated into corporatism. Rewards without responsibility have become the norm, whether in the board room or in Whitehall. Few heads rolled over the banking disaster, and none at all over the Stafford hospital catastrophe.

    All the time, ordinary people's living standards suffer, and now the govt wants us to borrow to boost "the economy" (aka top salaries)

  • rate this

    Comment number 7.

    Capitalism has wrecked itself as a result of out of control self-serving commercial banks and bankers. The connection between federal deficits and federal debt is a political choice, defined by law.  There is no economic connection between U.S. deficits and U.S. debt. QE is an attempt to adjust for the corruption without addressing its source!

  • rate this

    Comment number 6.

    The futures bright, the futures Yellen?
    China's not coming up we're going down to meet it.

  • rate this

    Comment number 5.

    #3 oops my fingers still aren't working I mean Yellen not Yellan or Yelland must do some hand loosening exercises.

    The point about QE is that its continuation creates a false market where the inefficient, corrupt and plain illegal continue to prosper on the back of QE to the disadvantage of properly run business. The result is the old, but true, adage bad money drives out good on a global scale.

  • rate this

    Comment number 4.

    2 JfH

    True. But in a post-growth world, we can only keep up the illusion of growth through either QE (the US) or a property-market debt bubble (UK). This stores up huge problems for the future, of course, but our leaders are not interested in any timescale longer than the next election.

  • rate this

    Comment number 3.

    (sorry for typo Ms Yellan!) The substantive point I made in #2 remains correct.

    I heard on R4 Today this am that architect of the Avenomics in Japan now says that US QE can NEVER be reversed or even tapered. This is an appalling position to recommend. It says that the whole global capitalist system is fundamentally broken. The man is an economic fool who is rejecting 3000 years of history.

  • rate this

    Comment number 2.

    This appointment has a bad feeling about it. Ms Yelland was one of the architects of the insane QE idea that has, and continues to, wreck capitalism. Capitalism requires that when organisations become bankrupt they are allowed to go bust. This rule is now in tatters. The longer it remains broken the more real damage it is doing to the whole capitalist system.

    QE must be stopped & rates raised.

  • rate this

    Comment number 1.

    I can't help feeling that this article is rather lightweight, saying more about the gender of the new chair than about policy implications.



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