WASHINGTON — Janet Yellen, President Barack Obama’s choice to head the Federal Reserve, would come to the post with more years and a wider range of experience at the central bank than her predecessors and a careerlong focus on the issue that remains at the center of public concern over the economy — jobs and labor markets.
Yellen’s emphasis on work and unemployment, on which she produced several major scholarly papers during her many years as a professor at the University of California, Berkeley, has also become the focus of Republican critics and some on Wall Street who fear she is soft on inflation. The Fed has a dual mandate to maintain stable prices and optimize employment, and some experts, including some of Yellen’s Fed colleagues, have seen the central bank as being too willing to tolerate inflation in order to lower unemployment levels.
For now, Fed critics have been largely quieted because inflation is very low and shows few signs of rapidly increasing in the foreseeable future. By contrast, unemployment remains high after four years of recovery. That has bolstered the Fed’s focus on maintaining stimulative policies to promote employment, of which Yellen, the vice chairwoman, has been one of the strongest proponents.
Yellen’s critics have often cited as evidence of her position a statement she made in April: “I believe progress on reducing unemployment should take center stage” for Fed policymakers “even if maintaining that progress might result in inflation slightly and temporarily exceeding 2 percent” — the Fed’s target rate.
But many economists say Yellen’s other public remarks, long experience at the Fed and record suggest she is nothing like the inflation dove the critics portray. After reading 42 of Yellen’s public speeches, Stephen Oliner of UCLA concluded that she closely toed the Fed’s traditional tough line on inflation.
Georgetown professor Harry Holzer, referring to 1999 when he was the Labor Department’s chief economist and Yellen headed the White House Council of Economic Advisers, said: “I was in the Clinton administration with her when unemployment was 4 percent, and she was very aware of inflation. She’s not a mindless stimulator.”
At the same time, Holzer said one of Yellen’s challenges would be to deal with the reputation in some circles that she is a dove. “At some point, I hope she rebuilds her credibility with bond investors and inflation hawks.”