Federal Reserve Chairwoman Janet Yellen says she doesn’t disagree with her predecessor on the substance of monetary policy. She does differ in style, which may prove important if the market reaction to her debut news conference is indicative.
The 67-year-old was more relaxed, direct and expansive than Ben Bernanke in handling questions on Wednesday, according to longtime Fed watchers. She referred to adult children “shacking up” with their parents because they can’t find work, suggested that comments by one regional Fed leader were “very extreme” and used almost 600 words to answer a question about the job market.
“She was pleasant and didn’t evade any of the questions,” said Michael Feroli, an economist at JPMorgan Chase & Co. “She was more direct.”
That’s what got her into trouble with the financial markets. Stock and bond prices sank after Yellen indicated that the Fed might start raising interest rates about six months after it ends its asset-purchase program late this year.
Yellen acknowledged at the news conference that getting the Fed’s message across to the markets isn’t easy. “We will try as hard as we can not to be a source of instability,” she said, recalling the turmoil in financial markets last year after Bernanke first suggested the Fed might begin to scale back its monthly bond buying.
Philip Orlando, market strategist for Federated Investors Inc., said Yellen should have followed former Fed Chairman Alan Greenspan’s example and not spoken so directly.
Greenspan once described his approach to a congressional committee: “Since I have become a central banker, I have learned to mumble with great incoherence,” he said, adding: “If I seem unduly clear to you, you must have misunderstood what I said.”
That’s not Yellen’s style. As vice chairwoman, she spearheaded efforts to make the Fed more transparent. “We will continue to try to communicate as clearly as we possibly can,” she told reporters this week.