Did Janet Yellen Influence This Week's Fed Announcement?

by: Cullen Roche

Here’s a pretty interesting thought from Brian Wesbury of First Trust:

“The statement from the Fed reads as if Chairman Bernanke handed the pen to Vice-Chair Janet Yellen and let her write it instead, which makes sense if he knows something the rest of us don’t – about her chances for being elevated to the top spot in the near future.

The Fed wrote that the pace of asset purchases was “not on a preset course.” This implicitly rejected Bernanke’s own words at the June press conference that quantitative easing would be finished around the time unemployment hit 7%. When asked about the 7% trigger today, Bernanke treated his old statement like it had the plague, saying there was “no fixed schedule” and “not any magic number” for ending QE, and, that the unemployment rate itself is not a great measure for the state of the labor market.”

This actually makes a lot of sense. If Bernanke has a foot out the door then he would definitely be looking to make the transition to a new Fed Chief very smooth. Janet Yellen is extremely concerned about the employment picture today so if she disagrees that 7% is the right tightening target then it makes sense for Bernanke to backtrack on his statements.

Said differently, all the supposed confusion and backpedaling that appears to have occurred in Wednesday’s statement might not actually be backpedaling at all. It might just be part of a smooth transition in an attempt to provide guidance that is more in-line with the Yellen Fed.