President Obama's nominee for second-in-command at the Federal
Reserve, Janet Yellen, is 'dovish' on inflation - she's not likely
to tighten monetary policy to counteract it.
Janet Yellen, nominated by President Obama to assume the
important No. 2 role at the Federal Reserve, said Thursday that the
economy is recovering from recession, "but the pace is not
sufficient to bring down unemployment very rapidly."
She spoke before the Senate Banking Committee, which must
consider whether to confirm her nomination to be vice chairman of
the Fed's board of governors in Washington. Her comment on the
economy fit with her reputation as more worried now about boosting
growth than about the risk that Fed policies will create inflation.
Ms. Yellen, currently president of the Federal Reserve Bank of
San Francisco, would occupy a powerful position close to Chairman
Fed Chairman Ben Bernanke. The outgoing vice chairman, Donald Kohn,
has done much to shape the Fed's overall stance on monetary policy
in recent years.
So who is Yellen?
She's an economist, and she's had lots of experience on both
sides of Fed operations: at its Washington headquarters as a member
of the board of governors, and more recently as head of one of 12
regional Fed banks, which keep tabs on local economies around the
Among the Fed's regional bank presidents, some are viewed as
"hawks" and some as "doves" on inflation. Yellen falls into the
These are relative terms. Hawks don't lack for worry about the
nation's high unemployment rate, or the risk of deflation if
monetary policy fails to encourage growth following a deep
recession. And doves aren't immune from concerns about inflation.
But the two camps do differ. The hawks will be sooner to act to
tighten monetary policy during an economic expansion.
"Job creation must be a high priority of monetary policy," Yellen
said in her opening statement before the Senate committee Thursday.
"But we must also avoid any threats to price stability. That means
that, when the appropriate time comes, we must withdraw the
extraordinary monetary accommodation now in place in a careful and
deliberate fashion," she said.
At a time when the Fed has drawn its share of public criticism -
including questions in some quarters about whether the Fed should
exist at all - Yellen also used her appearance to defend the notion
that the nation needs a central bank free of political interference. …