Wall Street went a bit berserk last week taking the global markets on a roller coaster ride with it; Jerome Powell took over as the Fed Chair in the same week, is too much to be a coincidence? A calm and competent Janet Yellen chaired her last FOMC meeting on Jan 31, and bid goodbye to her job that she did splendidly for 4 years.
Yellen spent 14 years in Fed, a large part of which she served as a loyal and able deputy to her predecessor Ben Bernanke. This also ensured continuity post Lehman Crisis and a new era of easy money. Yellen was the first woman to lead Federal Reserve in its 105 years history. In a fairer world, her tenor would have been extended, as was, most of her male predecessors’.
“Under Yellen, the US unemployment rate has fallen the most of any Fed Chair term in modern history” said The Washington Post. Unemployment rate dropped from 6.7% (start of her tenor) to 4.1% - even this didn’t push her to quicken the pace of rate hike, even as economists professed inflationary fears. She kept an ear to the ground while leading the organization, and maintained lower rates and looser monetary policy for the greater good of the economy.
In the recent times though, bond yields have been heating up on speculation of inflationary pressures thus quicker rate hikes. This fear of course has had far reaching effect spreading across global financial markets. Change in the top job in Fed feels like a tectonic shift given the fragile nature of the markets at present. Though Powell is expected to be following in the footsteps of his predecessor, Yellen was well entrenched, hence seemed well positioned to steer the economy without causing too many ripples.
So welcome to one more newness, I suppose; or not so new, maybe? Political agenda superseding everything else? God Bless America!
(and as I was writing this I couldn’t stop thinking of you Dr. Rajan! Incidentally, its Valentines Day today)