Farewell Janet Yellen, job done

Share On Facebook
share on Linkedin

Next Monday, February 5th will see Jay Powell take over at the Federal Reserve, becoming the 16th chair of the Board of Governors. This of course means that the incumbent chair, Janet Yellen will oversee her final meeting today.

Powell is expected to be a moderate leader with a similarly cautious approach like his predecessor. He is seen as a ‘consensus builder’ and was a unifyingfigure during his time as a Fed governor; for example he has never dissented from a central bank decision. But how will Yellen be judged in the history books once her time has passed?

If we look at the Federal Reserve’s “Dual Mandate“, this is stated as a mandate from Congress to “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates”.  So, regarding the first goal, let’s remember that when Yellen took over in 2014, more than 3.8m more people were unemployed and the jobless rate was at 6.7%. Fast forward to 2018 and this rate has now fallen to a 17-year low of 4.1%, a drop of more than a third in four years.

The second objective of slow and steady inflation has been achieved by Yellen although 2015 did see CPI figures drop below 0% for a period. Since then, prices have risen to around 2% and yet, Yellen has had to face that current central bank conundrum of weak wage growth with very strong jobs data.

Finally, Yellen has undertaken the gradual and sequential exit from years of unconventional monetary policy. Her unprecedented unwinding of QE has not derailed the markets nor economic growth. The Fed raised interest rates for the first time in seven years in 2015 and this year is on track to raise rates three times.

The Fed’s Dual Mandate objectives over the Yellen years

As stock markets have boomed and we’ve seen the broadest global recovery in 10 years, so Janet Yellen leaves her post with the US economy seemingly in a good place. Balancing low inflation with possible overheating in financial markets will be the puzzle for Powell to solve. The shift from the disinflation of last year to an economy with a spring in its step cannot be disputed. As a well-known market commentator said earlier this week, Yellen has engineered an ongoing ‘beautiful normalisation’.

Faraday Research offers real time FX and Equity trade signals from qualified analysts. Click here to try us free.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.

Leave A Reply

Do you want to write for our Newspaper? Get in touch: newspaper@advfn.com

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V: D:20220926 19:47:44