Federal Reserve Chairwoman Janet Yellen testified before Congress for the first time on Feb. 11. Facing skeptical lawmakers, Yellen emphasized continuity in the Federal Reserve’s strategy to wind down quantitative easing while keeping interest rates low. She has proven that she can withstand the heat of congressional scrutiny while assuring investors that she will not abandon the efforts of her predecessor, Ben Bernanke. Overall, Yellen’s testimony proves she has the potential to be a successful Chairwoman who will play a major role in improving the stability of the United States economy.
Yellen began her nomination hearing for Chairwoman following an announcement from Bernanke on the implementation of a strategy that has since proven contentious. Although job growth was positive in January, it was weaker than economists had hoped. Nevertheless, Bernanke believed that the economy was strong enough for the Federal Reserve to begin tapering its quantitative easing — a process by which the Federal Reserve buys bonds to increase its monetary base — but still too weak to increase interest rates. Some argue that cutting back the quantitative easing is premature, while others believe that the strategy has been too prolonged and may risk future inflation.
Despite criticism of Bernanke’s strategy, Yellen has remained adamant in her commitment to his existing policies. Faced with difficult questions, she responded succinctly and with great clarity, a departure from the Washington norm. Rep. Shelley Moore Capito mentioned that she understood more of Yellen’s testimony than that of the two Federal Reserve Chairmen before her. Yellen’s ability to send a clear message also comforted investors, and led to an increase on the yields of long-term U.S. treasury bonds.
Better still, the Chairwoman responded well to questioning unrelated to her economic decisions. She explained why she opposed the Government Accountability Office auditing the Federal Reserve on its interest rate choices with authority. Yellen explained to Rep. Michele Bachmann that even without the audit, the Federal Reserve could still be held accountable through hearings like the current one.
Yellen’s encouraging performance on Tuesday has proven that she is prepared to take on the challenges of the Federal Reserve. In spite of the questionable monetary policy she inherited, she remained steadfast in her goals while managing to reassure investors. The clarity Yellen displayed in her testimony bodes well for the future of the Federal Reserve.
A version of this article appeared in the Thursday, Feb. 13 print edition. Adam Fazlibegu is a staff columnist. Adam’s Angle is published every Thursday. Email him at [email protected].