Oct 9 (Reuters) – The Yellen era will feature more of the
same: the same monetary policy and the same unanswered
Appointed today as Ben Bernanke’s successor as Fed chief,
Janet Yellen is likely to pursue a similar approach to monetary
policy. That makes any taper in bond buying likely to be later
and gentler, a factor which will support, all things being
equal, riskier assets.
Less clear, and also unchanged, is how she and her highly
divided colleagues at the Fed will react as yet another year of
unsatisfactory growth and low inflation call into question the
wisdom of the whole approach.
What this means is that riskier assets like equities will
probably do better in the short term under Yellen than under the
alternative choices, notably Larry Summers, who withdrew from
consideration last month. That ‘better’ performance, however,
comes at the price of some serious embedded risks.
First, let’s look at the just-released Fed minutes from the
September meeting, at which they took the decision to delay the
taper amid what looks from the outside like much disagreement