As Janet Yellen’s tenure comes to an end, it’s worth reflecting on what may be her greatest accomplishment as chair of the Federal Reserve: With calm and dispassionate competence, she kept the central bank at arm’s length from a political system paralyzed by partisan strife.
Look at the rest of Washington to see how valuable to the country that distance from dysfunction has been -- and how improbable.
Yellen was an experienced Fed governor before taking the top job, but she wasn’t tested by crisis like her predecessor, Ben Bernanke. The immediate response to the crash that began in 2007 -- a setback unlike any since the 1930s -- and the subsequent hesitant recovery demanded fast and radical innovation. That was accomplished under Bernanke’s leadership, so by 2014, when Yellen took over, the Fed’s post-crash monetary strategy was well established. Yellen’s main task was to start unwinding the central bank’s emergency measures without drama.
That process is now smoothly under way. One can argue about whether the pace of normalizing monetary policy has been too fast or too slow. The main thing, though, is that Yellen’s Fed has guided investors to a clear understanding of its approach while shielding monetary policy from political strife.
It would be comforting to believe that Yellen managed this because people understand that monetary policy needs to be kept out of day-to-day politics, or because people mistakenly think that monetary policy is dull and technical and doesn’t much matter to their lives. Actually, the Fed’s insulation from flailing, self-defeating politics is more likely a result of the way its leaders present themselves to the public.
With norms of political cooperation collapsing on every side, this achievement is not to be taken for granted -- as Yellen’s successor, Jerome Powell, is all too likely to discover.