President Obama will formally announce Janet Yellen as his pick to run the Fed today, in a move that seems to be garnering widespread praise in the financial industry. Here's what you need to know about the prospective chief:
- She Cares a Lot About Jobs: Most of Yellen's academic research has centered on the effects of unemployment, the Wall Street Journal reports, and it suggests that she's likely to keep the economic stimulus coming. She has argued previously that in times of high unemployment, there's little risk of inflation, and so far she's been right.
- But She Also Cares About Inflation: She was crucial in setting the target at 2%, arguing that letting it fall too low was as risky as letting it get too high—a view now embedded in the Fed's philosophy.
- She Saw the Crash Coming: In 2005 she wrote that "there is a 'bubble' element" in the housing market due to low mortgage rates, and that if prices fell, it could damage spending and upend the economy, Bill Conerly at Forbes points out. The Journal adds that Yellen is, according to its analysis, the most accurate forecaster at the Fed.
- Banks Can Expect a Tight Leash: Yellen has said the crisis turned her from a "docile" regulator into one "strongly inclined ... toward tougher standards and built-in rules."
- Economists Like Her: The nomination "will be greeted well by market agents. It should be," one economist told the Journal. Another said she is "simply more qualified for the job than any of her predecessors," while still another called her "a real mensch" with "genuine integrity and humanity."
- New Boss, Same as the Old Boss: Most observers expect a smooth policy transition. "She was the least likely of all the chairperson candidates to rock the boat," a JP Morgan economist says. The Washington Post says her biggest challenge will be deciding when and how to unwind quantitative easing, a policy she championed.