North Texas Daily

Janet Yellen: The hawk of the Federal Reserve

Janet Yellen: The hawk of the Federal Reserve

Janet Yellen: The hawk of the Federal Reserve
February 22
00:35 2017

In the history of chairs of the Federal Reserve, Janet Yellen is handily one of the most hawkish. Just like in the stock market, where bulls and bears thrive, doves and hawks flutter around in the Federal Reserve. The abundance of animal-related stereotypes in the financial world is indicative of the types of personalities that thrive there.

Hawks and doves are personalities in monetary policy, with hawks being more fiscally conservative than others. Hawks are more aggressive in their stances, as they actively try to combat inflation with higher interest rates and tighter monetary policy. Doves, on the other hand, are not so fond of the higher unemployment percentages associated with higher interest rates, and would sacrifice inflation in order to keep unemployment low.

The reaction to Yellen’s comments that monetary policy was becoming too accommodative was expected, as the yield of two year notes decreased from 1.25 percent from 1.1 percent, and the 10 year note rose from 2.43 percent to 2.5 percent.

In the Dec. 14, 2016 monetary policy report to Congress, Yellen startled the markets by saying the U.S. economy was doing better than expected after the recession, and that the time had come for necessary measures to keep the economy growing. Yellen argued that long after the 2008 recession, interest rates were kept low to let the economy grow, as lower interest rates increased consumer interest rates and spending as well as investment.

However, unemployment figures have stayed low, and the economy seems to be doing quite well. As a result, inflation rates have been steadily increasing. It is good to finally see the Reserve take command. For the last two years, the only thing they have done is stand aside and let interest rates remain at their current level.

While some economic growth has occurred, Yellen and the Reserve could have pushed for more stimulus packages. Historically, in her two years as chairman, Yellen has only raised interest rates twice. And with the Federal Reserve predicting three interest rate hikes in 2017, it seems as if they have chosen to be more aggressive in leading the economy towards further growth.

Yellen’s actions have also positively affected the stock markets, with the Dow Jones Industrial average, the S&P 500 index and the NASDAQ Index all finishing out last year close to record highs.

The market’s reaction is also in line with President Donald Trump’s pro-business policies, as both easily excite the market. Although Yellen’s actions are indicative of a stronger Reserve, her comments and critiques about Trump’s economic policies are virtually non-existent. Any questions directed to her about Trump’s reforms and plans for the future are all met with unsurety.

The actions of the Federal Reserve in the last two months have shown that they are still a force to be reckoned with and hopefully in the future they will show aspirations to continue introducing policies for improving the U.S. economy. Most importantly, they can work alongside our president to continue allowing the economy to embark on its current path of growth.

Featured Illustration: Samuel Wiggins

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Matthew Li

Matthew Li

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