Janet Yellen's Lift Off

Abstract

Half way through her terms as Fed chair, Janet Yellen presided over the Fed’s controversial decision to start raising interest rates — a decision many viewed then, and many more view now, as premature. Was that decision consistent with Yellen's supposed commitment to full employment? Or was she instead a hawk in dove’s clothing, whose monetary overtightening kept millions out of work for no good reason? I argue that neither view is correct. Instead, the roots of the Fed's untimely rate hike, and Yellen's part in it, lay in her and other Fed officials’ ill-conceived plans for “normalizing” monetary policy.