Janet Yellen has been nominated by the president to be Chairman of the Fed. There is a strong desire for continuity in Fed policy, so she is the best pick to make that happen. There is currently unlikely to be any change in policy with forward guidance telling us there will be no changes in short rates until almost 2016. There could be some tapering in QE but that will not change the current direction. Vice Chairman Yellen is clearly focused on domestic growth issues and it is unlikely she is going to change policy with unemployment high and labor participation so low. She is not going to be fooled by a false unemployment reading when there are still significant labor slack.
The lack of any meaningful fiscal policy to help unemployment means that the Fed will have to be the macro workhorse and it is unlikely that Yellen will back away from that task.
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