Fed’s Yellen Forecasts Have Been Right So Far

Midway through Janet Yellen’s first year as Federal Reserve chair, consumer prices were rising at the fastest pace in 19 months and some Wall Street economists started asking how long she would be able to maintain the lowest interest rates since the Great Depression to fulfill her goal of full employment.

Yellen wasn’t fazed. At a June press conference, she said the increase in the consumer price index was likely to be temporary. “Data that we’re seeing is noisy,” she said, and broadly in line with the expectations of the policy-making Federal Open Market Committee. The next month, the CPI started to drop.

“She accurately interpreted what was going on behind the inflation data,” said Tim Duy, an economics professor at the University of Oregon in Eugene and a former U.S. Treasury Department economist. “It proved to be very insightful.”

The first woman to lead the central bank of a major developed economy, who completes her initial year on the job Feb. 3, proved to be a master of math forecasting economic data as she ended asset purchases in October and set up the first increase in the federal funds rate since 2006 without destabilizing global markets.

“She’s had an excellent track record as chair in a very demanding time,” said Dana Saporta, a U.S. economist at Credit Suisse Group AG in New York. “To date she’s had success in avoiding any sort of market tantrum.”

via Bloomberg

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