Make us your home page
Instagram

Yellen faces challenges as Fed trims bond buys

President Barack Obama and Federal Reserve Chairman Ben Bernanke introduce Janet Yellen during a news conference in October to announce her nomination to become the next leader of the Federal Reserve. Yellen’s tenure starts Feb. 1.

Getty Images

President Barack Obama and Federal Reserve Chairman Ben Bernanke introduce Janet Yellen during a news conference in October to announce her nomination to become the next leader of the Federal Reserve. Yellen’s tenure starts Feb. 1.

WASHINGTON — Janet Yellen will take the helm of a Federal Reserve facing a significantly different economic landscape from the one that dominated Ben Bernanke's tenure as chairman, confronting her with different decisions as well.

Bernanke's eight years leading the Fed were largely consumed with the Great Recession and his efforts to cure it by pushing down interest rates and pumping cash into the economy. Many economists think Yellen's big challenge will be deciding how to ease off some of those very policies, which Bernanke took with Yellen's support.

"Circumstances may demand more rapid tightening than people are expecting," said Bill Cheney, chief economist for John Hancock Financial Services, who envisions a growing economy this year. He contrasted that with Bernanke, who he said had to decide "when to step on the gas pedal and how hard" as the economy recovered weakly from the recession.

The Senate confirmed Yellen, a longtime Fed official and economist at the University of California at Berkeley, by a 56-26 vote Monday. She begins her four-year term Feb. 1, when Bernanke steps down.

Nominated by President Barack Obama to the top job in October, Yellen, the Fed's vice chair since 2010, comes to the post after a career in which she has focused in part on unemployment and its causes. Obama and congressional Democrats lauded her concerns for workers Monday.

The Fed announced in December that the labor market has improved enough that it will begin reducing its $85 billion in monthly bond purchases, starting with a $10 billion reduction this month. It has pushed that money into the economy to try keeping long-term interest rates low. The bond purchases have ballooned the Fed's holdings over $4 trillion.

But Yellen will face questions about how to manage that process. Moving too fast could spook financial markets and shove interest rates higher, while withdrawing the bonds too slowly could risk creating bubbles — that might burst — in real estate, the stock market or other assets.

Yellen also will have to decide when and how to ease off short-term interest rates, which the Fed has kept near zero since December 2008. To assure investors that those rates won't precipitously rise, the Fed has repeatedly issued statements saying that policy will continue.

Last month, the Fed said the low rates will continue "well past" when the U.S. unemployment rates falls to 6.5 percent. Unemployment was 7 percent in November.

.BIOGRAPHY

Age/birthplace: 67, Brooklyn, N.Y.

Previous post: Vice chair, Federal Reserve, 2010-present.

Education: Bachelor's degree in economics, Brown University, 1967; doctorate in economics, Yale University, 1971.

Yellen faces challenges as Fed trims bond buys 01/07/14 [Last modified: Tuesday, January 7, 2014 8:24pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Law firm's Russia ties prove nothing about Trump

    Business

    The statement

    "Law firm @POTUS used to show he has no ties to Russia was named Russia Law Firm of the Year for their extensive ties to Russia. Unreal."

    Sen. Chris Murphy, D-Conn., stands during a media availability on Capitol Hill, Monday, June 20, 2016 in Washington. A divided Senate blocked rival election-year plans to curb guns on Monday, eight days after the horror of Orlando's mass shooting intensified pressure on lawmakers to act but knotted them in gridlock anyway — even over restricting firearms for terrorists. (AP Photo/Alex Brandon)
  2. Pasco county lawyer disbarred for taking woman's money

    Real Estate

    NEW PORT RICHEY — The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis.

    The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis. 
[2016 booking photo via Pasco County Sheriff's Office]
  3. Rick Scott signs package of tax breaks

    State Roundup

    TALLAHASSEE — Gov. Rick Scott signed a tax cut package Thursday that — while vastly scaled back from what he wanted — eliminates the so-called "tampon tax" and offers tax holidays for back-to-school shoppers and Floridians preparing for hurricane season.

    Florida Governor Rick Scott signed a tax cut package that will cost state coffers $91.6 million during the upcoming year. [Joe Raedle | Getty Images]
  4. FBI probes fraudster's alleged church scam following Tampa Bay Times report

    Real Estate

    PLANT CITY — Once again, the FBI is investigating felon fraudster Victor Thomas Clavizzao.

    The FBI is investigating convicted mortgage fraudster Victor Thomas Clavizzao on new allegations following a Tampa Bay Times report.
[TImes file photo]

  5. Tampa Bay is ground-zero for assignment of benefits cases over broken auto glass

    Banking

    When Rachel Thorpe tried to renew her auto insurance last year for her Toyta RAV4, she was stunned to see her monthly premium had nearly doubled to $600. The Sarasota driver was baffled since her only recent claim was over a broken windshield.

    Auto glass lawsuits filed by a third party (through what's known as assignment of benefits) are skyrocketing in Tampa Bay.
[Times file photo]