Regardless of who holds the position, the Federal Reserve chairman always plays an influential role in the financial services industry, for both investors and savers. But Janet Yellen, the first woman to serve as the chair of the Fed Board of Governors, arrived in office just as the Fed was beginning to tighten the quantitative easing spigot. As the Fed tapers the bond purchases it started in response to the financial crisis, many observers worry about the effect on the stock market, while others are worried about the risk of inflation or deflation. Everybody is worried about the effect of higher interest rates on economic growth and for the bond market.
Some have wondered, however, if Yellen's tenure will simply be a continuation of her predecessor's.
She said as much in her semiannual monetary policy report before the House Committee on Financial Services in early February, pledging to continue former Chairman Ben Bernanke's work and emphasizing that she expects “a great deal of continuity in the FOMC's approach to monetary policy.”
She added that she served on the committee as it formulated the current strategy. “I strongly support that strategy, which is designed to fulfill the Federal Reserve's statutory mandate of maximum employment and price stability,” she said in February.
In an interview last year, another IA 25 nominee, Schwab's Liz Ann Sonders, said that while Yellen is a consensus builder like Bernanke, she may not let the consensus-building process go on as long as he was wont to do. “She may make a decision faster,” Sonders said.
It’s still early in Yellen’s tenure as chair of the Federal Reserve, but comments she made in mid-March showed just how much of an impact she has on the markets. She said at a press conference that the central bank could begin raising interest rates six months after it stopped buying up bonds, which had many in the industry expecting rates to rise by the middle of 2015.
Stocks tumbled after those comments.
She later walked back her prediction, saying at the end of March that the central bank’s stimulus will be needed for “some time.”
“This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed,” she told a Fed community development conference. “The scars from the Great Recession remain, and reaching our goals will take time.”
Prior to her confirmation, Yellen served as vice chair of the Board of Governors, and from 2004 to 2010, she was the president of the San Francisco Fed. She is a Professor Emeritus at the University of California, Berkeley, where she taught business and economics.
(Check out Investment Advisor's full IA 25 for 2014 list on ThinkAdvisor.)