November 2, 2017
For Immediate Release: November 2, 2017
Washington D.C. — CEPR's Co-Director and Economist, Dean Baker, issued the following statement regarding the appointment of the new Fed Chair:
“It is unfortunate that President Trump decided against reappointing Janet Yellen to chair the Federal Reserve Board. This decision broke with recent precedent in which presidents have reappointed first term Fed chairs, including those picked by a President of the opposite party.
“Trump’s decision, in this case, is especially striking since Yellen had done an extraordinary job as Fed chair by conventional measures. Under her tenure, the unemployment rate fell from 6.7 percent to 4.2 percent, the lowest rate in more than 17 years. The drop for African Americans and Hispanics has been even more impressive, with the unemployment rate for the former falling from 11.9 percent to 7.0 percent, and for the latter from 8.2 percent to 5.1 percent. As a result of this tightening of the labor market, wages are now rising up and down the income ladder, with those at the bottom seeing the largest gains.
“She accomplished all of this while keeping inflation well under control. In fact, inflation remains below the Fed’s target of a 2.0 percent average rate.
“In this respect, it is worth noting that Yellen, the first woman to serve as Fed chair, is effectively being fired, in spite of doing an outstanding job during her tenure. While gender presumably did not figure directly into the president’s decision not to reappoint Yellen, this is certainly an unfortunate message.
“It is also worth noting that Yellen made a point of promoting diversity in her role as Fed chair. She made a point of meeting with representatives of community groups and unions, rather than just people from the financial industry that tends to dominate discussions of monetary policy.
“She also urged the district Federal Reserve Banks to take diversity issues seriously. This urging undoubtedly played a role in the Atlanta district’s decision to pick Ralph Bostic as president, the first African American to serve as a bank president.
“Yellen also showed herself willing to experiment with new tools. In particular, she made a point in her Humphrey-Hawkins testimony to Congress in the summer of 2014 of warning about bubbles in several markets. This was a test of whether the Fed could deflate a bubble by calling attention to its existence and carefully documenting the evidence. If this method of warning the markets and providing information can be effective in deflating a bubble, it would be far preferable to mechanisms like higher interest rates, which have massive collateral damage in the form of mass unemployment.
“It is encouraging that Jerome Powell, President Trump’s pick for chair, has consistently supported Yellen in her monetary policy decisions. Hopefully, Powell will continue on the same course. Unfortunately, he does not have the extent of background and experience as Yellen, which does raise concerns about how he will respond when conditions in the economy change. Yellen’s departure as Fed chair is a major loss to the country.”
# # #