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Yellen Isn’t a ‘Knee-Jerk Dove,’ Former Colleague Kroszner Says

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Federal Reserve Vice Chairman Janet Yellen
Federal Reserve Vice Chairman Janet Yellen smiles before speaking at the American Economic Association's annual meeting in San Diego, California. Photographer: Sam Hodgson/Bloomberg

Sept. 24 (Bloomberg) -- Federal Reserve Vice Chairman Janet Yellen carefully analyzes economic data and isn’t an ideologue more focused on fueling growth than curbing inflation, according to Randall Kroszner, a former Fed governor.

“To just say ‘She’s a knee-jerk dove,’” that “is incorrect,” Kroszner, a professor at the University of Chicago, said today on a panel moderated by Michael McKee at the Bloomberg Markets 50 Summit in New York. “She really looks at the data.”

Kroszner and Yellen served together on the policy-making Federal Open Market Committee. Kroszner was a governor from 2006 to 2009, and Yellen was president of the San Francisco Fed from 2004 until 2010. Yellen became the Fed’s vice chairman in October 2010.

The likelihood that Yellen, 67, will be nominated to replace Ben S. Bernanke as Fed chief increased as White House officials began gauging lawmakers’ support and she won the backing of a top Senate Democrat last week. Senator Charles Schumer of New York, the chamber’s No. 3 Democrat and a member of the Senate Banking Committee, on Sept. 18 called Yellen an “excellent choice” to succeed Bernanke, whose term expires on Jan. 31.

Laurence Meyer, a Fed governor from 1996 to 2002, said on the panel that Yellen would go from being “the leader of the opposition” in favor of additional stimulus to running the Federal Open Market Committee.

“Now Janet is going to be chairman of the committee, not the leader of the doves,” said Meyer, a senior managing director at forecasting firm Macroeconomic Advisers LLC in Washington.

Surprise Decision

U.S. policy makers last week unexpectedly refrained from reducing their $85 billion in monthly bond buying, saying they need to see more signs of sustained labor-market gains. Bernanke said on Sept. 18 the Fed will alter record accommodation based on “what’s needed for the economy” and not “let market expectations dictate our policy actions.”

Policy makers led the markets to expect a taper in September, Meyer said. Central bankers decided against paring their stimulus because of their “growing lack of confidence” in their economic forecasts.

“We thought they were really itching to taper,” Meyer said.

To contact the reporter on this story: Caroline Salas Gage in New York at csalas1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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