The economic world according to the new chair of the Federal Reserve, Janet Yellen, doesn’t seem that different from the economic world according to the previous chairman, Ben Bernanke.
Right now, Yellen cares more about unemployment than inflation. She wants the Fed to be more transparent, and she is inclined to keep interest rates low until the economy improves.
"I think pursuing a policy of low rates to get the economy moving will best enable us to normalize policy and to get rates back to normal levels over time,” Yellen told the Senate Banking Committee at her confirmation hearing today.
But Yellen is not a carbon copy of Bernanke.
“One gets the impression she would pursue much more expansionary policy for a much longer period of time than Bernanke would,” says Norman Obst, a professor of economics at Michigan State University.
Senators asked Yellen about financial regulation, which is something the Fed is doing more of these days. She told Sen. Elizabeth Warren (D-Mass.) it is just as important as making monetary policy. And Yellen said the notion of financial institutions being “too big to fail” gives an unfair advantage to big banks.
Yellen also talked about economic inequality, something that, according to David Weiman, an economist at Barnard College, she has written about in the past.
“She is concerned about it, but it’s not a matter that the Fed can directly address,” Weiman explains. The Fed’s tools are designed to be blunt, to affect the whole economy.
After the hearing, J.P.Morgan economist Michael Feroli called Yellen “studiously ambiguous.” In a note to clients, he wrote, “If one only read the transcript but didn't watch the hearing, one would be hard-pressed to distinguish Yellen from Bernanke.”