December 2, 2023

Federal Reserve Chair Janet Yellen (L) congratulates Fed Governor Jerome Powell on being sworn in for a new term on the Fed’s board of directors in Washington in this handout photo taken and posted on June 16, 2014.

Federal Reserve | Reuters

Treasury Secretary Janet Yellen on Thursday gave the Federal Reserve high marks and how central bank officials navigated the U.S. economy during the coronavirus pandemic.

Yellen told CNBC that the Fed had “done a good job” over the past few months under Chairman Jerome Powell. Yellen led the central bank until the end of her term in 2018, when former President Donald Trump chose to appoint Powell, a Republican.

When asked if she would support Powell for a second term as Fed chairman amid rising inflation, Yellen backed off.

“This is a discussion I’m going to have with the President,” Yellen said during an interview aired on CNBC’s Closing Bell.

“I gave you my personal views on inflation,” she continued. “I have great respect for the Federal Reserve. And it is important that they independently judge what is appropriate.”

While overseeing various aspects of US economic policy, Yellen and Powell largely agreed on the efforts of Congress to stimulate the American economy in recent months.

As Fed chairman, Powell hesitated to weigh fiscal policy, but later in 2020 called on lawmakers to provide additional support to workers and businesses struggling during the pandemic.

Yellen is open to further spending in the form of a massive infrastructure deal and President Joe Biden’s American Families Plan.

With Powell’s term expiring in 2022, Biden faces a tough decision: stick with ex-investment banker Powell or choose a more progressive candidate to keep the Fed focused on issues like climate change and income inequality.

Powell received generally positive reviews during his first term as Fed chairman.

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Perhaps most impressive was the speed with which Powell and his colleagues initiated and successfully launched emergency loan and liquidity programs to stabilize the US economy in the spring of 2020.

Although the U.S. economy recorded double-digit unemployment rates and GDP growth passed 31.4% in the second quarter of 2020, economists and lawmakers alike credit the central bank for preventing a more severe crisis.

Powell completed two days of testimony on Capitol Hill Thursday when he told lawmakers that the Fed was watching inflation rise and that the US banking system remained strong.

“First of all, I want to thank you again,” said Senator John Kennedy, R-La., Powell Thursday morning. “We all remember well the spring of 2020, when the global economy almost collapsed. It wasn’t because of the measures you and your colleagues took. They kept this thing in the middle of the road for days you had to spit and cheer about it Worry about it, but you kept it in the middle of the street. “

The Fed continues to buy $ 120 billion a month in government bonds or mortgage securities as part of this effort and has kept rates near zero since the pandemic began.

Powell has also shown to many that he remains resilient to political pressure, an important quality for the leader of a government institution that is supposed to make monetary policy decisions regardless of bias.

Despite being nominated by Trump, Powell was often ridiculed by the former president, who often blamed his Fed chief for imperfect economic growth.

In 2019, Trump compared Powell and his impact on the economy to “a golfer who can’t putt” and insisted, with little effect, that central bank officials keep rates low. In tweets, then-President Trump also claimed that the country “does great with China and other trade deals,” with “the only problem” being Powell.