Former Fed chair Janet Yellen defended against the decision for further easing while holding office during a keynote luncheon at the Asian Financial Forum 2020.
«I feel very strongly that jobs are the most important aspect of income distribution,» said Yellen at this year’s AFF, currently an economist at the Brookings Institution. «Having an economy that is creating jobs, where people who want to work can work and earn decent wages – that is the most important contribution that monetary policy can make.»
This was in response to a question posed by the moderator and former chief executive of Hong Kong’s central bank, Norman Chan, who asked whether or not continued easing under her tenure as Fed chair hurt impoverished Americans that lacked assets like equities or real estate. Yellen noted that without loose monetary policy between 2014 and 2018 to spur economic recovery, the country would not have achieved its currently unthinkably low unemployment – the most critical distributional effect.
«I guess I would push back on the criticism that [continued easing] was harmful to poor people,» she said. «[But] I think that is a very valid concern. We can never rule out ruling out [the possibility] that setting low rates is not best for employment if there is high stability risk in the economy.»
Central Bank Independence
In light of ongoing comments by the Trump that have created the perceived threat of influence, if not intervention, by the administration in monetary policy, Chan asked Yellen about her views on central bank independence.
«We are united in the conviction that the Fed and its chair must be permitted to act independently and in the best interests of the economy, free of short-term political pressures and, in particular, without the threat of removal or demotion of Fed leaders for political reasons,” she said, reciting the commentary she had co-published in August last year with former leaders of the Fed, Paul Volcker, Alan Greenspan, and Ben Bernanke.
In addition to highlighting the lack of political considerations in documented Fed discussions, Yellen also underlined the historical disasters that risk occurring from state-run central banks such as the repeated cases of hyperinflation.
«Always a Central Banker»
Chan also asked Yellen about her post-Fed life, drawing parallels with his own retirement from the Hong Kong Monetary Authority and experiences of having lost «meaning in life» away from central banking.
«Once a central banker, always a central banker,» she responded. «I find myself addicted to [following] central banking.»
Aside to continued contributions to monetary policy through think tanks, Yellen shared that her next door neighbors included no shortage of former colleagues in Bernanke and Donald Cone.
«We call ourselves the FOMC – former open market committee,» she joked.
