Today Janet Yellen will go before the Senate Banking Committee to introduce herself (again) and be questioned by the panel of Senators. Her prepared remarks give us a good indication of her probable philosophy during her tenure as Fed Chair (assuming she is confirmed, which is likely).
We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession. Unemployment is down from a peak of 10 percent, but at 7.3 percent in October, it is still too high, reflecting a labor market and economy performing far short of their potential. At the same time, inflation has been running below the Federal Reserve’s goal of 2 percent and is expected to continue to do so for some time.
For these reasons, the Federal Reserve is using its monetary policy tools to promote a more robust recovery. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases. I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.
Take a look at the sentence we’ve highlighted in bold. It seems the only solution Yellen will offer to the failure of unconventional monetary policy is more unconventional monetary policy. It would seem Yellen plans on using QE to generate a strong recovery, enabling the Fed to end QE, even though the last four years of QE haven’t accomplished that. Expect more of the same under a Yellen Fed as we received from the Bernanke Fed.