The Direction of the Fed under Chairwoman Yellen
This week President Obama named Janet Yellen to be the next head of the Federal Reserve replacing Ben Bernacke who will step down from the post at the end of January after six years in the position. A milestone in the world of finance and economics, Ms. Yellen will be the first female to hold this post. She will immediately face challenges including providing guidance on the current bond purchasing program of the Fed, developing a strategy to handle the Federal Reserve’s expanded balance sheet (Exhibit 1) as a result of the Quantitative Easing (QE) programs and determining a course of action for the Federal Funds rate which has been close to zero since the financial crisis.
The decision by President Obama did not come as a surprise as the other primary candidate for the position, Larry Summers, withdrew his name after it looked as though he might not make it through the Senate approval process.
Exhibit 1
This week President Obama named Janet Yellen to be the next head of the Federal Reserve replacing Ben Bernacke who will step down from the post at the end of January after six years in the position. A milestone in the world of finance and economics, Ms. Yellen will be the first female to hold this post. She will immediately face challenges including providing guidance on the current bond purchasing program of the Fed, developing a strategy to handle the Federal Reserve’s expanded balance sheet (Exhibit 1) as a result of the Quantitative Easing (QE) programs and determining a course of action for the Federal Funds rate which has been close to zero since the financial crisis.
The decision by President Obama did not come as a surprise as the other primary candidate for the position, Larry Summers, withdrew his name after it looked as though he might not make it through the Senate approval process.
Exhibit 1
Federal Reserve Balance Sheet
This week President Obama named Janet Yellen to be the next head of the Federal Reserve replacing Ben Bernacke who will step down from the post at the end of January after six years in the position. A milestone in the world of finance and economics, Ms. Yellen will be the first female to hold this post. She will immediately face challenges including providing guidance on the current bond purchasing program of the Fed, developing a strategy to handle the Federal Reserve’s expanded balance sheet (Exhibit 1) as a result of the Quantitative Easing (QE) programs and determining a course of action for the Federal Funds rate which has been close to zero since the financial crisis.
The decision by President Obama did not come as a surprise as the other primary candidate for the position, Larry Summers, withdrew his name after it looked as though he might not make it through the Senate approval process.
Exhibit 1
Federal Reserve Balance Sheet
This week President Obama named Janet Yellen to be the next head of the Federal Reserve replacing Ben Bernacke who will step down from the post at the end of January after six years in the position. A milestone in the world of finance and economics, Ms. Yellen will be the first female to hold this post. She will immediately face challenges including providing guidance on the current bond purchasing program of the Fed, developing a strategy to handle the Federal Reserve’s expanded balance sheet (Exhibit 1) as a result of the Quantitative Easing (QE) programs and determining a course of action for the Federal Funds rate which has been close to zero since the financial crisis.
The decision by President Obama did not come as a surprise as the other primary candidate for the position, Larry Summers, withdrew his name after it looked as though he might not make it through the Senate approval process.
Exhibit 1
Federal Reserve Balance Sheet
This week President Obama named Janet Yellen to be the next head of the Federal Reserve replacing Ben Bernacke who will step down from the post at the end of January after six years in the position. A milestone in the world of finance and economics, Ms. Yellen will be the first female to hold this post. She will immediately face challenges including providing guidance on the current bond purchasing program of the Fed, developing a strategy to handle the Federal Reserve’s expanded balance sheet (Exhibit 1) as a result of the Quantitative Easing (QE) programs and determining a course of action for the Federal Funds rate which has been close to zero since the financial crisis.
The decision by President Obama did not come as a surprise as the other primary candidate for the position, Larry Summers, withdrew his name after it looked as though he might not make it through the Senate approval process.
Exhibit 1
Federal Reserve Balance Sheet
Since 1977 the Federal Reserve has been assigned by Congress with a dual mandate of maximizing employment and providing stable prices (i.e. limited inflation). Most economists agree that Chairwoman Yellen could be slightly more willing to have the Federal Reserve stimulate the economy. Part of this view is based on a speech she gave in April where she stated that instead of the common Fed goal of 2% inflation that the Fed could temporarily tolerate inflation as high as 2.5%. With Yellen as Chair of the Federal Reserve, the general consensus among economists is that the Federal Funds rate (Fed’s target for short-term rates) might not be increased until the end of 2015 or early 2016. This accommodative policy is certainly good news to the market in the short-term but if accommodative policies are left in place too long, the negative impact of potentially higher inflation could be a headwind to stocks at some point.
Since 1977 the Federal Reserve has been assigned by Congress with a dual mandate of maximizing employment and providing stable prices (i.e. limited inflation). Most economists agree that Chairwoman Yellen could be slightly more willing to have the Federal Reserve stimulate the economy. Part of this view is based on a speech she gave in April where she stated that instead of the common Fed goal of 2% inflation that the Fed could temporarily tolerate inflation as high as 2.5%. With Yellen as Chair of the Federal Reserve, the general consensus among economists is that the Federal Funds rate (Fed’s target for short-term rates) might not be increased until the end of 2015 or early 2016. This accommodative policy is certainly good news to the market in the short-term but if accommodative policies are left in place too long, the negative impact of potentially higher inflation could be a headwind to stocks at some point.
Since 1977 the Federal Reserve has been assigned by Congress with a dual mandate of maximizing employment and providing stable prices (i.e. limited inflation). Most economists agree that Chairwoman Yellen could be slightly more willing to have the Federal Reserve stimulate the economy. Part of this view is based on a speech she gave in April where she stated that instead of the common Fed goal of 2% inflation that the Fed could temporarily tolerate inflation as high as 2.5%. With Yellen as Chair of the Federal Reserve, the general consensus among economists is that the Federal Funds rate (Fed’s target for short-term rates) might not be increased until the end of 2015 or early 2016. This accommodative policy is certainly good news to the market in the short-term but if accommodative policies are left in place too long, the negative impact of potentially higher inflation could be a headwind to stocks at some point.
Since 1977 the Federal Reserve has been assigned by Congress with a dual mandate of maximizing employment and providing stable prices (i.e. limited inflation). Most economists agree that Chairwoman Yellen could be slightly more willing to have the Federal Reserve stimulate the economy. Part of this view is based on a speech she gave in April where she stated that instead of the common Fed goal of 2% inflation that the Fed could temporarily tolerate inflation as high as 2.5%. With Yellen as Chair of the Federal Reserve, the general consensus among economists is that the Federal Funds rate (Fed’s target for short-term rates) might not be increased until the end of 2015 or early 2016. This accommodative policy is certainly good news to the market in the short-term but if accommodative policies are left in place too long, the negative impact of potentially higher inflation could be a headwind to stocks at some point.
Since 1977 the Federal Reserve has been assigned by Congress with a dual mandate of maximizing employment and providing stable prices (i.e. limited inflation). Most economists agree that Chairwoman Yellen could be slightly more willing to have the Federal Reserve stimulate the economy. Part of this view is based on a speech she gave in April where she stated that instead of the common Fed goal of 2% inflation that the Fed could temporarily tolerate inflation as high as 2.5%. With Yellen as Chair of the Federal Reserve, the general consensus among economists is that the Federal Funds rate (Fed’s target for short-term rates) might not be increased until the end of 2015 or early 2016. This accommodative policy is certainly good news to the market in the short-term but if accommodative policies are left in place too long, the negative impact of potentially higher inflation could be a headwind to stocks at some point.
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