Janet Yellen is readied by years of riding shotgun
Yellen, a former professor who is currently the Fed’s vice chair, has a reputation as one of the central bank’s most employment-focused officials and has also been at the forefront of a communications “revolution” at the once-secretive Fed.
She has been a close ally of chairman Ben Bernanke as he took the central bank further and further into unfamiliar terrain to boost the US economy, backing three rounds of bond-buying that have swelled the Fed’s balance sheet to about $3.7tn (€2.7tn).
If confirmed by the US Senate, she would be the first woman to head the Fed in its 100-year history.
The white-haired Yellen played a big role in the Fed’s adoption of a 2% inflation target and its decision to treat undershooting and overshooting that target as equally problematic.
Like many Fed officials, Yellen believes ensuring that the public and financial markets understand the central bank’s plans is critical in making those policies effective.
“The effects of monetary policy depend critically on the public getting the message about what policy will do months or years in the future,”she told journalists in April.
The softly spoken 67-year-old is, by her own admission, willing to tolerate inflation overshooting the Fed’s 2% target when faced with uncomfortably high unemployment. “A wise and humane policy is occasionally to let inflation rise even when inflation is running above target,” she said in 1995. In a speech last year, she argued that the central bank can achieve the best economic outcome by allowing inflation to exceed the Fed’s target for several years to achieve a faster reduction in unemployment, as long as longer-term inflation expectations remain in check.
Yellen, who earned her doctorate in economics from Yale, was the daughter of a Brooklyn doctor who saw patients in the family home. Her mother was den mother to a troop of Cub Scouts.
Charles Saydah, a retired journalist who went to school with Yellen, said she was “a self-described nerd, nose to the grindstone”.
Yellen decided to pursue a career in economics after hearing Nobel prize-winning economist James Tobin speak and being impressed by his combination of academic accomplishment and public service.
Her notes of Tobin’s lectures were so exhaustive that students passed them around as study guides.
That thoroughness has stayed. Yellen arrives at Fed meetings with carefully researched written remarks, delivering them in measured tones with a slight, somewhat nasal Brooklyn accent that nearly 30 years in California did not fully eradicate.
Yellen’s experience in policymaking is as solid as her career in academia, which included teaching at Harvard University and the London School of Economics as well as the University of California, Berkeley’s Haas School of Business.
She had two stints as a Fed policymaker before becoming vice chair, as a board member and as president of the San Francisco Federal Reserve Bank, and headed former president Bill Clinton’s Council of Economic Advisers for two and a half years.
Yellen has written extensively about monetary policy, but she has also struck farther afield.
One paper, written with her Nobel Prize-winning economist husband George Akerlof, analysed single motherhood, arguing that a rise in out-of-wedlock births was due to a decline in “shotgun” weddings. That paper proposed forcing unwed fathers to pay child support.
Yellen met Akerlof when they were both at the Fed in Washington; their wedding was hasty, although only because Akerlof was moving to London and the couple wanted to stay together. Their only child — Robert Akerlof — teaches economics at the University of Warwick.
Yellen, whose love of gourmet food does not stop her frequenting the Fed’s staff cafeteria, joked in 1995 that dinner at her house meant “a diet that is richer in discussions of economics and policy issues than many people would find appetising”.
