Fed Chairwoman Janet Yellen's Legacy and Economic Lessons
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This is Your Money Matters from The Wall Street Journal. Welcome to Your Money Matters. I'm J.R. Whalen in New York. Janet Yellen's four-year term as Federal Reserve Chairwoman comes to an end this week, and she leaves the U.S. economy in much better shape than when she assumed the top post. Wall Street Journal chief economics correspondent Nick Timros joins us from our Washington bureau to discuss Yellen's legacy and what's to come at the Fed. So Nick, Janet Yellen has actually been in the Fed for a total of 14 years. In that time, she's seen nearly every type of economic climate.
That's right. She was president of the San Francisco Fed from 2004 to 2010. Then President Obama named her to be the Fed's vice chair, so she was the number two under Ben Bernanke. during his second term as Fed chair, and then she succeeded him in 2014 when President Obama nominated her as the Fed chair. So she was a very vocal advocate for the aggressive stimulus that Ben Bernanke helped implement to kind of unleash this counter-assault against the financial crisis after the downturn in 2009. And her job as chair has been to slowly unwind all of that support for which she forcefully advocated in the years right after the crisis.
And, you know, with regard to implementing monetary policy over that time, she'll really be known for her patience, perhaps above everything else. And she used that patience almost a lot of times against the advice of critics.
Right. If you go back to 2014, when she became chair of and then look at the debate in 2014 and 2015, and even in 2016, there were a lot of people saying, gee, the Fed really needs to start raising interest rates. And she was an advocate for being patient, and she laid out in a speech in 2014 a number of job market indicators that she was looking at besides just the unemployment rate. And what she was really saying was, look, there might be more slack in the labor market than this you know kinda headline unemployment rate is telling us and if that's the case we we might not want to move so quickly to raise interest rates even though unemployment is gonna get below five-and-a-half percent or five percent and if you look at how the economy's performing right now a lot of people would say she was right to do that now what happens over the next couple years is really gonna help determine what her legacy will be because if the economy
were to overheat and we had a financial market bubble, then that would tarnish her legacy. And by the same token, if inflation, which has been a little bit soft for the past year, if inflation were to continue to underperform the Fed's 2% target that they have, then some people might attack her from the left and say, well, wait a minute, why did we really need to raise rates at all? But she's been fairly candid about in saying, you know, we don't have a great picture of what's going on right now, so that's why we should be moving gradually. And that's really something that a lot of people have, for the moment at least, said seems to be the right course.
We're speaking with Chief Economics Correspondent Nick Timoros, and you're listening to Your Money Matters from The Wall Street Journal. Welcome back, everybody.
How did Janet Yellen’s career lead to her Fed chairmanship and what roles did she hold previously?
So, Nick, in terms of the future, as we were talking about before the break, Yellen's successor, Jay Powell, he has a lot of the same characteristics as Yellen does when it comes to implementing monetary policy. But the law of averages would tell us that he is likely to experience economic turbulence to some degree during his term.
Because Jay Powell voted consistently with Ben Bernanke and then with Janet Yellen, a lot of people see him as a continuity candidate. But he's not Ben Bernanke, and he's not Janet Yellen. Those were two macroeconomists very well regarded within their fields. Powell is not an economist, even though he is well regarded as someone who understands capital markets and finance very well. So he's probably going to bring maybe less of a reliance on the macroeconomic models that have been a bedrock of Fed forecasting, and he may actually pay more attention to signals of
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