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| Janet Yellen is sworn in on Capitol Hill |
Janet Yellen has
officially been sworn in as the new chair of the Federal Reserve, replacing Ben
Bernanke. Yellen is the first woman to hold the position, and faces several
obstacles in her initial year as chair. Yellen’s primary objective will be to
wind down the Federal Reserve’s bond-buying stimulus program without harming
the nation. Although the American economy has been improving recently, it is
still very fragile. Yellen is therefore in an incredibly challenging place to
enact economic policy that is stable yet effective. The phased reduction of the
Federal Reserve’s $85 billion a month Quantitative Easing program has already
created issues in emerging financial markets. Quantitative Easing has kept US
interest rates low and has therefore resulted in large outflows of cash from
the United States into other currencies, as people search for more substantial
returns abroad. It will be highly interesting to follow how Yellen’s
appointment will shift US economic policy, and how this resulting policy will
affect not only our domestic economy, but the global economy. Every action has
a reaction, and Yellen’s position is undoubtedly a powerful one.
Yellen is an
established economist, and is professor emeritus at the University of
California at Berkeley specializing in business and economics. Her credentials
suggest that she may be able to respond to the challenges at hand, regardless
of the incredible complexity of the situation. However, Bernanke’s Quantitative
Easing program marked a period of unprecedented government stimulus, and may
provide Yellen substantial, unforeseen obstacles that could threaten the
success of her office.
--
Chris Geary
