Janet Yellen, First Jewish Woman Fed Chair, Brings Compassion to Tough Job

Signals Need To Boost Economy Even If Inflation Rises

Banker-in-Chief: Janet Yellen is introduced by President Barack Obama as his pick to be the next Federal Reserve chief.
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Banker-in-Chief: Janet Yellen is introduced by President Barack Obama as his pick to be the next Federal Reserve chief.

By Reuters

Published October 09, 2013.
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Janet Yellen, President Barack Obama’s pick to lead the Federal Reserve, combines a solid reputation as an economist with a keen interest in communication - fitting for someone who once joked that her dinner guests should expect a discussion of economics.

Yellen, a former professor who would be the first Jewish woman to hold the job, 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 U.S. economy, backing three rounds of bond buying that have swelled the Fed’s balance sheet to about $3.7 trillion.

Obama announced on Wednesday that he would nominate Yellen to succeed Bernanke. If confirmed by the U.S. 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 percent inflation target and its decision to treat undershooting and overshooting that target as equally problematic.

Like many Fed officials, Yellen, who counts hiking and cooking among her hobbies, 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 a journalists’ group in April.

The softly spoken 67-year-old is, by her own admission, willing to tolerate inflation overshooting the Fed’s 2 percent 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 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.


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