9th October 2013
President Obama’s nominee for chairman of the Federal Reserve Janet Yellen will take the same cautious approach to withdrawing from quantitative easing as her predecessor Ben Bernanke.
However in a report issued this week, the firm suggests that Yellen may actually give greater weight to the requirement to bring down unemployment.
Blackrock’s Russ Koesterich says: “As Federal Reserve Chairman, we would expect Janet Yellen to approach the daunting task of winding down an era of ultra-loose monetary policies in a similar fashion as her predecessor-with caution.
“With the President’s nomination of Yellen, we continue to believe that the Federal Reserve could begin tapering its $85 billion-a-month bond purchasing program as soon as December and that its pace will likely be slow, and dependent on the strength of the US economy. Further, a Yellen-run Fed would likely place significant weight on the 2nd part of the Fed’s dual mandate, full employment, even at the cost of a temporary rise in inflation. We maintain our belief that rate hikes are unlikely to come before 2015.”
The BlackRock Investment Institute has also put together a detailed report into how an quantitative easing exit may be executed, for those who want to get to grips with the detail included on the following link – Next Exit: the Road ahead for the Fed.