Obama’s replacement for Ben Bernanke as Chairman of the US Federal Reserve has been narrowed down to a two-horse race, between Larry Summers and Janet Yellen. Summers was Obama’s chief economic adviser in the aftermath of the sub-prime crisis and Treasury Secretary under President Clinton from 1999-2001. Janet Yellen is a former President of the Federal Reserve of San Francisco and a long time Fed insider. She has worked closely with Bernanke and Greenspan, but is actually considered the main architect of the Fed’s quantitative easing program that began in December of 2008. The FT reports that the Obama administration “has framed its selection criteria in a way that makes” Summers “the obvious choice”.
Summers is regarded as being against Yellen’s QE policy and has preferred fiscal rather than monetary policy to steer the economy. Summers would be an interesting mix that could lead to higher interest rates. The appointment of Summers seems to be in line with the ECM forecasts. This is something we need to watch closely come January.