President Barack Obama clearly signaled this week that Federal Reserve chairman Ben S. Bernanke will be leaving the central bank when his term ends in January and that looming departure means Bernanke will want to begin tapering asset purchases this year, said Harvard University economics professor Martin Feldstein.
The Fed has been making $85 billion in monthly bond purchases in an effort to spur job growth and galvanize faster U.S. economic expansion. The policy making Federal Open Market Committee met today in Washington, with four more FOMC meetings scheduled before the end of the year.
“One of the implications of the fact that Ben is now very, very likely to be leaving at the beginning of the year is that he’s going to want to get the so-called exit strategy under way,” Feldstein said on CNBC television before the FOMC meeting. “He’s going to want to start the tapering before he leaves so that he can say, ‘I did all these good things, and I put us on an exit path.’”
Obama said Bernanke has “already stayed a lot longer than he wanted or he was supposed to” in an interview with Charlie Rose that was broadcast June 17 on PBS.
“The president more or less said the other day, on television, ‘Your time is up, Mr. Bernanke,’” Feldstein said. “I didn’t think that was a very nice gesture on the president’s part.”
It’s “hard to say” who Bernanke’s replacement will be, Feldstein said. A third of those surveyed expect he’ll be succeeded by Fed Vice Chairman Janet Yellen, 66, according to the latest poll of investors, analysts and traders on May 14.
“The president has ideas that he’s not sharing with us, but he’s decided to get out there ahead of Ben Bernanke in terms of declaring that Bernanke can go back to Princeton,” Feldstein said. While Obama was “telling the world” that Bernanke will leave, it’s unclear to what extent the Fed chairman had discussed his leaving with the president, Feldstein said.
Feldstein, 73, is a former president of the National Bureau of Economic Research and a member of the NBER committee that declared the recession ended in June 2009. He formerly served as chief economic adviser to President Ronald Reagan.