Five Questions for Yellen

Janet Yellen’s confirmation hearing before the Senate Banking Committee on Thursday is as an opportunity to consider the appropriate boundaries for the Federal Reserve’s independent operational policies. The Fed Chair has the decisive say in whether the Fed will utilize broad or narrow operational means to achieve its objectives. The Chair’s judgment establishes operational boundaries between the Fed and the markets on one hand, and between the Fed and the fiscal authorities (Congress and the Treasury) on the other. Janet Yellen’s likely confirmation matters hugely for how the Fed will act in the future.