WASHINGTON – Janet Yellen pursued a simple strategy Tuesday for handling a battery of lawmakers who came armed with skepticism about the Federal Reserve: Politely stand your ground. Be consistent. Signal continuity at the top.
In her first public words since becoming Fed chair this month, Yellen struck a note of unity with her predecessor, Ben Bernanke, who stepped down last month. She embraced Bernanke’s dual outlook on the economy: It’s improving enough to withstand a slight pullback in the Fed’s stimulus, yet it still needs the help of low interest rates.
When her questioners turned aggressive, Yellen stoutly defended the Fed’s approach to the 2008 financial crisis and the recession. She rebuffed suggestions that its stimulus efforts were ill-conceived or that stricter financial rules were squelching growth.
At times, she basked in good wishes from members of the House Financial Services Committee, to which she was delivering the Fed’s twice-a-year report to Congress. Several female members offered congratulations to the first woman to lead the Fed in its 100 years.
I’ve understood more of what you’ve said today than the last two (Fed leaders), said Rep. Shelley Moore Capito, R-W.Va.
Yellen, 67, dropped no hints of how her leadership might depart from that of Bernanke, 60. She stressed that the Fed would decide whether to continue paring its bond purchases – and eventually raise short-term rates – based on how the economy improved.
At times, her descriptions of Fed policy and strategy mirrored Bernanke’s nearly to the word. Her key goal: To assure investors that the Bernanke-Yellen transition would be seamless.
It appeared to work. Yellen’s testimony contributed to a powerful rally on Wall Street. The Dow Jones industrial average soared nearly 200 points.
She clearly has read the Fed playbook on how to not say a lot, said Brian Gardner, head of Washington research for Keefe, Bruyette & Woods, an investment bank.
Yellen repeated the Fed’s assurances that it expects to keep its key short-term rate near zero well past the time the unemployment rate drops below 6.5 percent as long as inflation remains low.
That assurance provoked a tart response from Republicans: The Fed had earlier hinted that unemployment at 6.5 percent would be when it would start to consider raising short-term rates, they noted.
Jeb Hensarling, R-Texas, the committee chairman, pointed out that Yellen herself had once said that sensible central bankers followed rules, and he wondered whether it was now improvising on interest-rate policy.
Using your words, Hensarling said, are you a sensible central banker, and if not, when will you become one?
I believe that I am a sensible central banker, and these are very unusual times, she replied.
Several Democrats asked Yellen how the Fed might narrow the rising gap between the richest Americans and everyone else. Yellen struck a note of regret.
She suggested that the growing concentration of wealth might help explain why the recovery has been so sluggish. Yet she said the Fed could do little to stop one of the most disturbing trends facing the nation.