As a top deputy to Bernanke, Yellen supported the central bank’s unprecedented bond buying programs and was a driving force behind a new strategy adopted in 2012 to commit the central bank to goals on inflation and unemployment.
“It’s hard to imagine a better choice by virtue of intelligence, temperament, demonstrated good judgment, understanding of the Fed, and extensive experience,” said Alan Blinder, a Princeton University professor and former Fed vice chairman. “She should make a great Fed chair.”
Summers also welcomed the decision, saying that “Janet Yellen is a terrific choice to lead the Federal Reserve. I have admired and learned from her ever since she taught my first macroeconomics graduate class in 1976,” he said in an e-mail.
As the Fed’s No. 2 official, she has articulated the case for maintaining highly accommodative monetary policy. In a series of 2012 speeches, she outlined why interest rates could remain near zero into late 2015, and in a 2011 speech she justified the Fed’s first two rounds of large-scale asset purchases with an estimate that the programs would create 3 million jobs.
“She’s even more of a dove than Bernanke is, but there’s nobody who can say she’s not credentialed because of the range of experience she’s got,” said J. Alfred Broaddus, a former president of the Federal Reserve Bank of Richmond who debated Yellen over the Fed’s mandates during the 1990s. “She has experience that almost nobody else can bring to the table at this point.”
Among Yellen’s tasks, if confirmed, will be to execute the unwinding of the Fed’s record monetary stimulus. Bernanke has said the central bank won’t end monthly bond purchases until the labor market shows sign of substantial improvement.
The Fed has also announced plans to hold short-term interest rates near zero until the unemployment rate reaches at least 6.5%.
“She comes from inside the Fed, so is experienced,” former European Central Bank President Jean-Claude Trichet told Bloomberg in Paris today. “She has all the qualities needed to make a great Fed president.”
A member of the Fed’s Board of Governors and chairman of the White House Council of Economic Advisers during the Clinton administration, Yellen later was president of the Federal Reserve Bank of San Francisco before Obama nominated her to the No. 2 job at the Fed in 2010.
As Fed vice chairman, Yellen’s attentiveness to the district Fed presidents proved invaluable in building consensus on policy issues.
When the Federal Open Market Committee gathers in Washington for monetary policy decisions, Yellen often has breakfast with one district bank president, then sits down with another, before the meeting starts in the morning, her appointment calendars show. That familiarity with her colleagues would probably make her an adept manager of the central bank, said Robert Eisenbeis, a former Atlanta Fed research director.