Beginning November 2008, the Federal Reserve has poured billions into the US economy through the controversial, yet now ubiquitous, monetary policy known as “Quantitative Easing”. Nearly 5 full years later, the Fed continues to purchase $85 billion in bonds each month. Whether the practice has been effective in stimulating economic growth is still the source of much debate; however, equity markets have experienced broad gains since the recession of 2007-2009. In fact, following QE1, the Dow Jones Industrial Average has gained over 76%.
As Ben Bernanke’s second term as Fed Chairman comes to a close, the controversial QE policies of his tenure are in doubt for the first time in half a decade. His June announcement regarding the “tapering” of Quantitative Easing elicited an immediate 4% pullback in the equity markets.
While President Obama has yet to nominate Mr. Bernanke’s successor, Janet Yellen, vice chairwoman of the Federal Reserve Board of Governors, appears to be a strong early candidate with support for many of Bernanke’s practices. Will Mr. Bernanke’s successor continue the bond buying indefinitely?
Wall Street overwhelmingly believes President Obama will and should pick Janet Yellen to be the next chairman of the Federal Reserve, according to a survey.
Preliminary results of the CNBC Fed Survey for July show 70 percent of the 40 participants who responded believe Obama will pick Yellen, currently, the Fed’s vice chair, to replace current Chairman Ben Bernanke, whose term is up in January.
Just 25 percent believe it will be the former Treasury Secretary Larry Summers.