Goodbye Mrs. Yellen!

On Wednesday, December 13th, the Federal Reserve (Fed) raised, as expected, its fed funds rate by 25 bps to 1.50%. This was the fifth and last rate hike under Janet Yellen’s Presidency. Indeed, the current Fed Chairman, who succeeded Ben Bernanke in February 2014, will therefore make way for Jerome Powell next February. Meantime, Federal Reserve officials also raised their forecast for economic growth in 2018 – from 2.1% to 2.5% according to the median estimate – reflecting confidence that the tax-cut legislation moving through Congress will boost growth.

“Janet Yellen has been a great strength of stability for the economy”. Everything is said in this sentence pronounced in early October by Christine Lagarde, the current Executive Director of the IMF. Indeed, during Janet Yellen’s tenure, the United States banking system regained its stability nearly 10 years after the global financial crisis. Moreover, the economy is at or near full employment in a context of moderate economic growth. However, inflation is still missing. Mrs. Yellen has shown wisdom and was patient, two essential qualities for a very hard task: exit an unconventional monetary policy, start raising fed funds rate and reducing the Fed’s balance sheet. She did the job, and she did it well. Goodbye Mrs. Yellen!