InterRegional for Strategic Analysis

On 26 January 2021, the US Senate approved the appointment of Janet Yellen as Treasury secretary. Yellen, the former chair of the Federal Reserve, is the first woman to hold this position. She has a distinguished career and significant accomplishments in the field of monetary and banking policy. Yellen also taught economics at the University of California, Harvard University, and the London School of Economics, and she spent years in Washington as the chair of the Council of Economic Advisers, the second woman to hold this position. Through many policies, Yellen has been deeply involved in some of the most important changes in the Federal Reserve in its over 100-year history, most notably full employment without inflation and avoiding internal and external pressure on the Federal Reserve to retreat from zero rates after the global recession and its impacts on the American economy.



 A distinguished scientific and professional life: 



1- Teaching economics at world-renowned universities: Janet Yellen was raised in Brooklyn in a family whose father was a doctor and mother was a teacher. After earning her doctorate from Yale University, she taught economics at the University of California, Harvard University, and the London School of Economics. She also spent years in Washington as the chair of the Council of Economic Advisers, the second woman to hold this position.



 2- First woman to hold male-dominated positions: President-elect Joe Biden’s selection of Janet Yellen for Treasury secretary marked the culmination of her decades-long professional career in which she was often the first woman to hold many positions in the fields of economic and monetary policy dominated by men. Yellen was the first woman to head the US central bank after her nomination in 2013 by President Barack Obama, and she is also the first woman to hold the position of Treasury secretary. Yellen also held several positions at the Federal Reserve, where she met her husband, economist George Akerloff, who won the Nobel Prize in 1977. The two co-wrote several works, and their only son is a university economics professor. It is worth noting that Yellen was the chair of the Council of Economic Advisers under President Bill Clinton, from 18 February 1997 until 3 August 1999. Prior to that, she was appointed a member of the Federal Reserve Board of Governors, from 12 August 1994 until 17 February 1997. She chaired the Economic Policy Committee for the Organization for Economic Cooperation and Growth from 1997 to 1999, and was the president of the Western Economic Association International and vice president of the American Economic Association.



 Yellen’s most significant economic policies:



1- Full employment without inflation: Through various policies, Yellen has been deeply involved in some of the most important changes in the 100-year history of the Federal Reserve, most notably full employment without inflation. She crafted the 2012 framework that set the Fed’s official 2% inflation target, and her 2014 discourse on income inequality—which she saw as an obstacle to American democracy—helped move the issue to the fore at the Federal Reserve Bank and paved the way for the US central bank’s newly modified framework that aims for "universal" full employment. In this context, she has been instrumental in persuading fellow policymakers that unemployment can be lower than previously thought without increasing inflation.







2- Avoiding pressure on the Federal Reserve: Her viewpoint (employment without inflation) allowed her to avoid internal and external pressure on the Federal Reserve to retreat from zero rates after the global recession until December 2015. Effectively, this allowed hundreds of thousands of Americans to find more jobs than they otherwise would have.



That decision was controversial and seen by many as a premature move that unnecessarily slowed the recovery. Indeed, as financial markets were shaken, the economy slowed, and the Federal Reserve did not raise interest rates again for a full year, Yellen—who faced years of criticism from those warned that low interest rates would trigger inflation and financial instability—was eager to normalize the policy after years of unconventional easing Since then, other Fed policy-makers have come around to the viewpoint that they should not be in a rush to raise interest rates.







Expected impacts on the economy:



1- Countering the negative effects of the pandemic: Economists believe that Yellen will reveal the economic rationale for increasing spending in the near term to boost job growth and reduce the gap between rich and poor. Investors view Yellen as a driving force for further fiscal measures to combat the economic crisis unleashed by the Coronavirus pandemic and as someone in a strong position to ensure that the Treasury continues to work closely with the Federal Reserve. In this regard, Tim Adams, a former Treasury official and president of the Institute of International Finance, said Yellen "will be a trusted, steady, and pragmatic hand on the helm as the U.S. navigates the economic recovery from the COVID-19 pandemic."



Strengthening financial policies: Yellen has a good relationship with the current chair of the Federal Reserve, Jerome Powell, and she supervised the president of the Federal Reserve Bank of New York, John Williams, and the president of the Federal Reserve Bank of San Francisco, Mary Daly. These relationships will help advance financial policies.







2- Coordinating efforts at the international level: Yellen has good connections with many of the main financial players in Europe and elsewhere, with whom she had personal dealings during her time at the Federal Reserve. Overall, Yellen is expected to face difficult negotiations with Republicans in Congress to find agreement on the various economic and financial policies leading to passage of Biden’s economic agenda, such as raising taxes on the wealthy and investing trillions of dollars in infrastructure, education, and climate change.







Overall, Yellen is expected to face difficult negotiations with Republicans in Congress to find agreement on the various economic and financial policies leading to passage of Biden’s economic agenda, such as raising taxes on the wealthy and investing trillions of dollars in infrastructure, education, and climate change. 



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Public perceptions of the first woman to hold the position of US Treasury Secretary