Don’t Expect Janet Yellen to Make Any Waves at the Fed

The big news in central banking today is Janet Yellen’s impending nomination to replace Ben Bernanke as head of the Federal Reserve. As lots of people will tell you, she’s fantastically well qualified; she’ll be the first woman to head the Fed; and she’s a monetary dove. (Or an “unemployment hawk” if you prefer.)

That’s the nickel take on Yellen, and so far, in the dozens of pieces I’ve read about Yellen last night and this morning, I haven’t seen anything else about her that’s truly new or interesting. Until now. This is from an interview Jim Tankersley did with Yellen last November:

On using monetary policy to try to get the economy revving:

“There are a lot of things holding back the economy. If one were making a list of the top five or ten things holding back the economy, you wouldn’t say money being too tight, and interest rates being too high were on it. But interest rates and credit conditions are what we can affect. They are not the problem, but they can be part of the solution.”

That’s….remarkable. Yellen doesn’t seem to think that monetary policy even makes the top ten list of things that could help the economy right now. Admittedly, her wording is a little bit opaque. Technically, all she says is that current Fed policy isn’t one of the big things holding back the economy. But the implication is pretty clear: if that’s true, it means that there aren’t any changes to Fed policy that could have a significant positive effect on the recovery.

In one sense, I suppose this isn’t a big surprise. Yellen has been one of the architects of current Fed policy, and nobody thinks she’s the kind of person likely to promote radical new ideas. Still, the fact that monetary policy right now doesn’t even make her top ten list means that she thinks Fed policy right now is essentially ideal. Once you get outside the top ten, after all, you’re dealing with effects so small they’re barely noticeable. Steady as she goes, folks.


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