Fed interest rate hike

Fed chief walks the talk by sticking to her beliefs

US Federal Reserve chairman Janet Yellen at a news conference following a Federal Open Market Committee meeting in Washington on Wednesday. Within a year of taking up the reins of the US Fed, the 69-year-old has drifted away from the policy followed
US Federal Reserve chairman Janet Yellen at a news conference following a Federal Open Market Committee meeting in Washington on Wednesday. Within a year of taking up the reins of the US Fed, the 69-year-old has drifted away from the policy followed by her predecessor to raise rates from their near-zero levels.PHOTO: BLOOMBERG

It was perhaps the most talked- about financial decision of recent years, yet United States Federal Reserve chairman Janet Yellen looked unruffled amid the tumult swirling around her yesterday.

And it was clear from her announcement that US interest rates would rise 25 basis points that she knew just how momentous the move was.

"We see an economy that is on a path of sustainable improvement," she said, hoping that people would take it as a signal that "conditions will continue to strengthen, and jobs prospects will be good".

Dr Yellen's demeanour seemed to have convinced investors around the world to breathe a little easier, as markets reacted with calm to the Fed decision.

Within a year of taking up the reins of the US Fed, the 69-year-old has drifted away from the policy followed by her predecessor Ben Bernanke to raise rates from their near-zero levels.

In the process, she has clashed with critics and grappled with fractious Fed colleagues and dissent within the institution to embark on what may be remembered as the Yellen era.

Snowy-haired and petite, Dr Yellen is an academic at heart, having spent nearly two decades teaching at the University of California at Berkeley, where she is now professor emeritus.

She was on the Fed's Washington-based board of governors in the 1990s and head of the San Francisco Fed in the 2000s, before being appointed second-in-command at the central bank in 2010.

"She is a very wonderful, elegant woman who has a great sense of humour," her husband, Nobel Prize- winning economist George Akerlof, told The Washington Post.

Counting another Nobel Prize winner, economist James Tobin, among her mentors, Dr Yellen maintains a low profile, occasionally working from home.

US President Barack Obama once joked that her idea of a fun family vacation was a trip to the beach lugging a suitcase full of economic textbooks.

In a speech at the New York University last year, she spoke about the importance of hard work and the willingness to take a stand when circumstances demanded it.

"Such circumstances may not be all that frequent but, in every life, there will be crucial moments when having the courage to stand up for what you believe will be immensely important," she said.

That moment may have come for Dr Yellen as the Fed prepares to tackle the task of unwinding years of economic stimulus.

Dr Lawrence Summers, whom Dr Yellen beat out for the Fed post, had argued in recent months that, with inflation quiescent and much of the world facing economic weakness, it was not the time for the Fed to raise rates.

But Dr Yellen, who has a habit of being chronically early for her appointments, seems confident, pointing out that the Fed has sometimes waited too long to tighten policy.

"It is because we don't want to cause a recession," she said about the decision, "that it is prudent to begin early and gradually."

A version of this article appeared in the print edition of The Straits Times on December 18, 2015, with the headline 'Fed chief walks the talk by sticking to her beliefs'. Print Edition | Subscribe