New Fed chair rebuffs her critics, pleases investors

Published: February 11, 2014
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Janet Yellen pursued a simple strategy Tuesday for handling a battery of lawmakers who came armed with skepticism about the Federal Reserve.

Politely stand your ground. Be consistent. Signal continuity at the top.

In her first public words since becoming Fed chair this month, Yellen struck a note of unity with her predecessor, Ben Bernanke, who stepped down last month. She embraced his dual outlook on the economy: It’s strengthening enough for the Fed to slightly pull back its stimulus yet still needs the help of low interest rates.

Yellen stoutly defended the Fed’s approach to the 2008 financial crisis and the recession. She rebuffed suggestions that its stimulus efforts were ill-conceived or that stricter financial rules were squelching growth.

At times, she basked in good wishes from members of the House Financial Services Committee, to which she was delivering the Fed’s twice-a-year report to Congress. Several female members offered warm congratulations to the first woman to lead the Fed in its 100 years.

Fed leaders can make unusual witnesses at Washington hearings. Unlike many government officials, they strive to protect their political independence by avoiding confrontation. Yellen kept her guard up yet aimed not to sound combative.

She dropped no hints of how her leadership might depart from Bernanke’s. She stressed that the Fed would decide whether to continue paring its bond purchases — and eventually to raise short-term rates — based on how the economy improved. The bond purchases are intended to keep borrowing rates low to stimulate growth.

At times, her descriptions of Fed policy and strategy mirrored Bernanke’s nearly to the word. Her key goal: Assure investors that the Bernanke-Yellen transition would be seamless. It appeared to work. Yellen’s testimony contributed to a powerful rally on Wall Street. The Dow Jones industrial average soared nearly 200 points.

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