President Donald Trump is ending Federal Reserve Chair Janet Yellen’s leadership of the U.S. central bank after just one term at the helm of the institution she has led since 2014.
She is the first Fed chair since G. William Miller in 1979 not to be reappointed to another four-year term. Former Fed chairmen Paul Volcker, Alan Greenspan and Ben Bernanke were all nominated by a president of one party and renominated by a president from the other.
Trump plans to pick Fed Governor Jerome Powell to replace Yellen when her term expires at the helm of the bank in February, three people familiar with the decision said Wednesday. A formal announcement is due Thursday, and the nominee requires Senate confirmation.
Yellen has presided over almost four straight years of mediocre economic growth and a jobless rate that has steadily fallen even as she directed the gradual exit from crisis-era policies. On her watch, the Fed halted a controversial bond-buying campaign, lifted interest rates off zero, and began to unwind its $4.5 trillion balance sheet. In contrast, all three of her immediate predecessors were at the helm during a recession, though each held the job for longer.
Appointed by President Barack Obama after serving as Fed vice chair, Yellen faced skepticism from Republican lawmakers unhappy with the central bank’s expansive rescue programs during the 2007-2009 financial crisis, which they argue exceeded its mandate and trespassed onto Congress’s fiscal policy preserve.
It’s not yet clear whether Yellen would stay on at the Fed to serve the remainder of her term as a board member through January 2024.
Trump’s view of Yellen evolved. During his presidential campaign in 2016, he complained that the Fed was keeping rates low to boost the economy for Obama’s sake. While campaigning for the White House, Trump said at one point he would likely replace Yellen at the Fed. He also accused her and colleagues of “doing political things.”
Yellen said in response to the campaign trail criticism that “I can say, emphatically that partisan politics plays no role in our decisions.”
Once Trump took office this year the tone shifted, and he signaled respect for the job she was doing and included her on a shortlist of candidates. On Wednesday, Trump told reporters that Yellen is “excellent.”
Some lawmakers wanted to see a change in Fed leadership. Republican Senator Richard Shelby, who serves on the banking panel that will review the nomination, said in September that he’d “like to see somebody else in there that’s pro-growth.”
During her tenure, the 71-year-old labor-market economist pursued a deliberate strategy to bring millions of Americans sidelined by the Great Recession back into the workforce. It was a gamble that the jobless rate didn’t reflect the full scope of labor market slack. The risk was letting the economy overheat.
The result: Unemployment fell to a 16-year low on Yellen’s watch, while broader indicators of labor market slack also tumbled and inflation hasn’t taken off. Yellen talked about inequality much more than her predecessors and black unemployment fell to the lowest rate since 2000 during her term.
“Janet’s legacy is multi-faceted,” said Julia Coronado, president of MacroPolicy Perspectives in New York. The Federal Open Market Committee’s willingness to test the lower limits of the unemployment rate “was a good example of her leading through analysis, data dependence, and thought. We can’t rely on past models. We are in an unprecedented era.”
Her appointment as chair capped public service spanning two decades. She was vice chair of the Fed board, president of the San Francisco Fed, a Fed governor under the chairmanship of Alan Greenspan and head of President Bill Clinton’s Council of Economic Advisers.
Yellen’s gradualism was never a rote response. It showed a high amount of sensitivity to a wide array of information -- from financial markets, to international growth, as well as signals from the domestic economy. In 2015 and 2016, the FOMC set aside the more aggressive rate-hiking assumptions it started with, raising just once in each year.
Transparency steps became more incremental under Yellen.
After years of pressure by Congress, the Fed in July published a report that discussed its interest-rate strategy in the context of policy rules. Texas Republican Jeb Hensarling, the chairman of the House Financial Services Committee, commended Yellen, but added that she should discuss “not how, but why” the FOMC deviated from policy rules. In another small step toward openness, Yellen also began releasing her appointment book while in office. Previously, it was available on request.
Tough post-crisis bank rules have skewed credit away from borrowers with lower credit scores, which has had consequences. Yellen said in a speech in Jackson Hole, Wyoming, this year that regulatory effects may be crimping credit, but she didn’t elaborate. Her defense of post-crisis financial rules put her at odds with Trump and his economic advisers.
Yellen earned her Ph.D. in economics from Yale University in 1971. She is professor emerita at the University of California at Berkeley, where she joined the faculty in 1980.
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