Yellen Demurs on Second Powell Term, Saying She’ll Talk to Biden
(Bloomberg) -- U.S. Treasury Secretary Janet Yellen said the question of whether to nominate Federal Reserve Chair Jerome Powell for a second term is a conversation for her and President Joe Biden, declining to give her opinion in a televised interview.
“That’s a discussion I’m going to have with the president,” Yellen said Thursday on CNBC. The Fed has done a “good job,” she said, without elaborating.
Powell’s four-year term as chair ends in February, and historically presidents have decided in the late summer or fall on whether to renominate a central bank chief. Former President Donald Trump denied Yellen a second term that would have begun in 2018, picking Powell instead.
The Fed chair earlier Thursday completed two days of hearings before Congress, where he repeatedly expressed the view that the surge in inflation this year will prove transitory.
Yellen said, “we will have several more months of rapid inflation,” though expectations for price gains still look well contained. The recent drop in Treasury yields reflects the view that inflation will remain under control, she said.
Investors haven’t forgotten the pattern of secular stagnation -- of structurally slower paces of growth and inflation -- that prevailed before the pandemic, Yellen said. Low yields also reflect an outlook for interest rates to remain at a “moderate” level, she said.
The Treasury secretary also commented on home valuations, a day before that issue is set for discussion at the Financial Stability Oversight Council, a group of financial regulators that Yellen chairs.
“We have seen a big increase in housing prices, in part due to the changes in the pandemic and the low interest rate environment we have,” Yellen said. Still, “the lending that’s taking place is to creditworthy borrowers, so I don’t think we’re seeing the same kinds of dangers in this that we saw in the run-up to the financial crisis in 2008.”
Asked about the risk from new variants of Covid-19, Yellen said that it’s possible for new shutdowns of the economy, and underscored the importance of increasing vaccinations.
Turning to taxes, Yellen said it’s “not certain” that Amazon.com Inc. will meet the 10% profitability threshold to be covered by a global tax accord designed to subject big multinational firms to levies in local jurisdictions.
Earlier this month, however, French Finance Minister Bruno Le Maire said Amazon would indeed be subject to the new rules. That’s because the online retail giant’s more-profitable cloud services business would be treated as a separate entity, under what the OECD is calling “segmentation” that may be applied in “exceptional circumstances” when company units meet the revenue and profit thresholds.
©2021 Bloomberg L.P.