Yellen … Still Yellen

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FT Harding reports that Yellen — the person most likely to take over when Bernanke’s term ends on Jan 31 2014 — shows no interest in pulling back on the Fed’s currently easy monetary policy.

With inflation low and unemployment high, “it is entirely appropriate for progress in attaining maximum employment to take centre stage in determining the [Federal Open Market] Committee’s policy stance,” said Janet Yellen, the Fed’s vice-chair, in a speech at a conference in Washington on Monday.

Makes total sense, given that measures of core inflation have been running at around 1% AR over the past six months. The idea that the fed will even slow down the pace of their easing (for that is what slowing bond purchases means) when inflation is ~100bps below their 2% target is bizarre.


  1. impossible to argue against so I won’t. fiscal policy hasn’t really helped either as I pointed out yesterday at my place.
    Yellen made an interesting speech last week.

  2. Hyperinflation is around the corner! Buy gold! Maybe the nutters will be right some day. But not this day.

    Maybe this is vindication of Bernanke’s consensus approach to MP. Even after he leaves, his imprint will be there.

    1. That would be the best outcome — they are leaning heavily on the expectations channel, so credibility and stability of the policy rule is key.

    2. Hmm, imprint there may be but the search for consensus has inflicted a high price in the meanwhile.

  3. Markets are forward looking, the real question is, are we at the bottom of loose monetary policy in the US. And how is the way up going to look like.

    1. Monetary policy? Policy is clearly more aggressively aimed at stimulating demand, but it is probably not too easy. The move into risk assets is helping to boost things

    2. Relatively to the economy, I am not not sure, but in historical terms, yes, it is loose.
      No one is expecting further easing at this stage… what will be the impact on usd, gold, shares, real estate, etc. We may be at the bottom of the down cycle in the US, after the GFC, we may finally be at the beginning of the recovery from GFC and slowly go back to “normal”. Maybe.

  4. Last time I looked on a forward looking Taylor rule it aint loose at all.

    Ricardo you should bookmark andrew Gelman if you haven’t already. The man is gold.

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