Yellen Cruising


Janet Yellen cleared a crucial hurdle in her likely journey to becoming Fed Chair today: she passed her hearing before the Senate Banking Committee in a question-and-answer session that could only really be considered uneventful.  Appelbaum of the NYT explains that, with hardly any doubt that she would indeed be confirmed, senators glossed over her qualifications to focus primarily on nontechnical questions concerning the Fed’s effects on such marginal issues as income inequality.  Yellen addressed these considerations in her characteristically calm way, explaining that lower long-term interest rates have indeed benefited households and borrowers and adding that the Fed’s macroprudential policies – “supervisory responsibilities,” in her words – are just as crucial as its monetary policy actions.

Interestingly, however, she seemed confident in her statement that the US economy showed no indications of asset price bubbles.  Contrary to what may justly be considered mainstream financial opinion, Yellen claimed little evidence of investors “reaching for yield,” despite the obvious fact that current yields can hardly go any lower.  She concluded that the housing market should be monitored but showed no signs of frothiness.

Which is exactly what Chairman Ben Bernanke said… at his confirmation hearing in 2005.  Proceed with caution.

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