John Maynard Keynes famously said that his highest ambition was to make economic policy as boring as dentistry. In this respect, as in so many others, Federal Reserve Chair Janet Yellen is proving to be a loyal Keynesian.
Yellen’s second news conference as Fed chair conveyed no new information about the timing of future interest rate moves. She gave no hints about an “exit strategy” for the Fed to return the $3 trillion of bonds it has acquired to the private sector. She told us nothing about the Fed’s expectations on inflation, employment and economic growth — not even about the board’s views on financial volatility, regulation, asset prices or bank credit policies.
Yellen refused even to repeat, or repeal, her earlier answer to a question about the meaning of the “considerable period” she expected between the end of tapering and the first rate hike. At her first news conference, Yellen responded to a similar question by blurting out “six months.” This caused an eruption of volatility in financial markets — that lasted about five minutes.
This time Yellen decided to do no such favors for the high-frequency traders on Wall Street. Instead she gave the same frustrating answer to every question about the Fed’s future plans: “It depends.”
To quote one of many examples: “There is no mechanical formula whatsoever for what a considerable time means. It depends on how the economy progresses. We will be looking at the progress we make in achieving our labor market objective and inflation objective.”