The grilling of Janet Yellen as the nominee to be the next Fed Chair is sure to raise some interesting fodder. I will comment as appropriate but I have a presentation on Friday so it may take some time for me to get the posts up. I will suggest the following though: the nomination of Yellen is a status quo pick. She is an insider and has been present through the QE policies and so understands the rationale behind current Fed policy. This makes here unlikely to undertake drastic immediate change. This is in contrast to a Summers nomination. Summers ego was likely to get in the way and he would need to change policy simply to put his stamp on events.
The Fed has been wrong about growth lately in their forecasts, and wrong in a very bad way. The Fed forecasts have not yet taken into account fundamental changes in individual behavior. It would not be a surprise that such forecasts were wrong during or in the immediate aftermath of the crisis, but to still be so wrong at this point is worrisome. What is the problem? People are scared.
In the last month, I have fielded many questions regarding Federal Reserve monetary policy and financial markets. Not a surprise since so much happened in that sphere. The Fed announced a change in policy. No wait, they didn’t. In fact,all they said at some point in the future we may see the U.S. economy strong enough that massive monetary stimulus may no longer be necessary. We should really file this under a non-story type of title, akin to saying at some point the sun will rise, but I am not sure when.