Janet who? Janet Yellen, the seemingly-unknown current vice-chairperson of the Federal Reserve(the Fed), was nominated by the President to succeed Ben Bernanke after several White House favorites were first considered. Bernanke, the current chairman of the Fed, is vacating the position he has held since 2006 at the end of January 2014.

Yellen now awaits the Senate confirmation process, which she should easily glide through as the Republicans appeared to support her as a candidate while the President sought alternative contenders earlier in the process. She appears to have a very good track record on judging appropriate policy. Whether a dove (low rates and inflation) or a hawk (inflation a threat), what’s important is supporting the appropriate policy at the appropriate time…which she has done. She is battled-tested, having worked in key policy roles through both the Asian financial crisis in 1997and the recent global financial crisis.  She has spent most of the past two decades as a leading voice within the Fed, initially as a member of the Federal Reserve Board of Governors, then as president and chief executive officer of the San Francisco Federal Reserve Board, and over the past four years as vice chairman of the Federal Reserve.

We think Yellen, like Bernanke, may view the risk of the economy becoming stuck in a low-to-moderate growth path great enough to provide ongoing risk insurance, such as delaying the tapering of quantitative easing or even, if necessary, providing additional stimulus.

Yellen is characterized by those who know her as a brilliant thinker who focuses on the human side of economics.  As vice chair of the Fed, she was credited with forming the Fed’s communication policy including the chairman’s quarterly press conference. This press conference – and communication in general – may become more critical as we transition from a period of large-scale asset purchases to one of strong “forward guidance” from the Fed. Yellen has also been a proponent of maintaining the Fed’s zero interest rate policy and continuing the Fed’s asset purchase program.

If confirmed, she will be the first women to lead the Fed.  We think she is extremely qualified and will do an exceptional job.  We don’t expect much change with respect to the current Fed policy, and neither does the market. Upon her nomination in early October, the market let out a big yawn; markets didn’t move much then and haven’t since.


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