In a recent economic commentary (here’s the link), Bob Baur and I examined the pros and cons of the two top candidates to succeed Ben Bernanke as Chairman of the Federal Reserve: Janet Yellen and Larry Summers. Today, I’d like to use this blog post to examine a few different avenues where Yellen and Summers might differ were each to get the Fed’s top job.
The first way I’d look at this would be from their respective statements on Fed policy. Almost everything we’ve heard from Yellen suggests that she’ll be Spider-Man 2 to Bernanke’s Spider-Man…more of the same, still pretty good, but not saddled with the task of having to explain how this all started. Summers is harder to read. Read more
I know you think you understand what you thought I said, but I’m not sure you realize that what you heard is not what I meant.
Alan Greenspan said it, but it certainly captures what current Fed chairman, Ben Bernanke, has to be thinking. In his efforts to be open and transparent, Bernanke has struggled over recent weeks to make himself understood. Markets reacted to talk of tapering the bond-buying QE program as if the Fed had announced that it would be hiking the fed funds rate to 5% by Labor Day. So since the last Fed meeting, Bernanke and several Fed governors have been in the public eye trying to clarify that “tapering” is not “tightening.”
With the release of the latest FOMC meeting’s minutes (available here), and echoed in his speech on July 10 (text here), we saw a bit more clarity that’s meant to ease markets back towards Bernanke’s intended message. Two key points that you can pull from the recent Fed communications: Read more
Monetary accommodation was on the rise in May. Of the twelve major bank meetings during the month, nine resulted in cuts, two central banks held policy steady, and only one actually increased rates to control inflation.
While the Federal Reserve didn’t change direction, it sent mixed messages regarding its quantitative easing (QE) program. The minutes from the April-May FOMC indicated willingness to “increase or reduce” the pace of QE, a change from previous meetings that were primarily focused on QE reduction aspects. Read more