WASHINGTON — Federal Reserve Chair Janet Yellen has promised to serve out her term heading the central bank until it expires in 2018, ending speculation that she could resign earlier and give President-elect Donald Trump another important appointment to make when he assumes office in January.
In testimony before the Joint Congressional Economic Committee Thursday morning, Yellen was asked by Rep. Carolyn Maloney, D-N.Y., whether she could envision "any circumstances" where she might not serve out her term as Fed chair.
"No, I cannot," Yellen responded. "I was confirmed by the Senate to a four-year term which ends at the end of January 2018, and it is fully my intention to serve out that term."
Yellen's comments put to rest the idea that she might offer her resignation to Trump upon his inauguration. Trump made various criticisms of Yellen and the Fed's handling of monetary policy under her leadership, calling her actions "political" and suggesting that interest rates were being kept low in order to benefit his Democratic opponent Hillary Clinton.
But Yellen defended the Fed and its independence during the hearing, saying there is statistical evidence demonstrating that countries with independent central banks see better outcomes than those whose monetary policy is dictated by elected leaders. The Fed is accountable to Congress and the American people, Yellen said, but its independence allows the central bank to pursue necessary actions that keep the currency stable, even if it may not be politically advantageous to the party in power or politically popular. And in countries where the central bank is directly controlled by the government, it often forces the central bank to buy the government's debt, which harms both the currency and the government's ability to borrow, she said.
"There is clear evidence of better outcomes in countries where central banks can take the long view, are not subject to short-term political pressures," Yellen said. "Sometimes central banks need to do things that are not immediately popular for the health of the economy. And we've really seen terrible economic outcomes in countries where central banks have been subject to political pressure."
Yellen went on to defend the Dodd-Frank Act, President Obama's signature financial regulatory reform law that Trump and the Republicans in the congressional majority have vowed to roll back, albeit to an unspecified degree, in the next Congress. Yellen said that the law has strengthened the U.S. financial system since the financial crisis and that Americans should be wary of walking back those gains.
"A high priority, I think, for all Americans should be that we want to see put in place safeguards through supervision and regulation that result in a safer and sounder financial system," Yellen said. "I think we have been doing that, and our financial system as a consequence is safer and sounder. And many of the appropriate reforms are embodied in Dodd-Frank."
