As Federal Reserve Chair Janet Yellen and Governor Jerome Powell vied in 2017 over who’d head the central bank in the future, they moved in lockstep behind the scenes on monetary policy – except when it came to the placement of a comma.
(Bloomberg) — As Federal Reserve Chair Janet Yellen and Governor Jerome Powell vied in 2017 over who’d head the central bank in the future, they moved in lockstep behind the scenes on monetary policy – except when it came to the placement of a comma.
Transcripts released on Friday of the Fed’s 2017 policy-making meeting showed both Yellen and current Chair Powell wrestling over how to balance the risks of too low inflation with a tight jobs market they feared could overheat, as then-President Donald Trump mulled whom he’d tap to lead the central bank.
In the end, Yellen and Powell adopted what the latter described as a “patient but not too patient” strategy, lifting interest rates three times in 2017 and beginning to reduce the Fed’s bloated balance sheet via so-called quantitative tightening.
The 2017 transcripts show Fed policymakers taking what might be kindly called an “elephant-in-the-room” approach to the contest between Powell and Yellen over who’d head the Fed the following year. The issue wasn’t brought up – even in December after Trump had announced his preference for Powell.
At that gathering, Powell did seem to take a slightly more positive stance toward the Trump tax cuts then making their way through Congress than Yellen did, with the then-Fed chair voicing skepticism about how much they’d boost economic growth in the longer run.
Their debate over the comma was more clear cut.
In June, Yellen — who later became Treasury secretary after Joe Biden defeated Trump in 2020 — proposed including the following sentence in the post-meeting statement: “Near-term risks to the economic outlook appear roughly balanced but the Committee is monitoring inflation developments closely.”
Powell said he supported the change, but as he heard it there was no comma in the sentence after the word “balanced,” adding that his backing would be “even more wholehearted” if one were included.
After Yellen agreed, Powell said, “In that case, I’m all in.”
–With assistance from Steve Matthews.
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