Maybe the markets needed a woman’s touch.
At the very least, Wall Street liked what newly installed Federal Reserve Chair Janet Yellen had to say Tuesday in her first remarks before Congress since being sworn in.
Stock markets jumped more than 1 percent, as Yellen reassured investors that her Fed would continue to taper its bond buying while pressing on to lower the unemployment rate.
In other words, Yellen will be a lot like Ben Bernanke — her predecessor.
“I expect a great deal of continuity in the FOMC’s approach to monetary policy,” she said before the House Financial Services Committee.
“I served on the [FOMC] as we formulated our current policy strategy, and I strongly support that strategy,” she said.
Yellen suggested that her Fed would continue cutting back, or tapering, its Treasury and mortgage-bond purchases — which have fallen from $85 billion a month in December to $65 billion in February.
But the 67-year-old Brooklyn-born economist left the end date, and the process, open to change.
Yellen’s policy on interest rates, likewise, seemed to be a continuation of Bernanke’s policies.
The Fed has said it would begin looking at raising rates when unemployment goes below 6.5 percent, but, as with tapering, that is not a hard line in the sand.
Stock markets cheered at the news. The Dow Jones industrial average gained 192.98 points, or 1.2 percent, to close at 15,994.77, while the S&P 500 jumped 1.1 percent, to close at 1,819.75.
“Her comments provided markets with some certainty,” said Cullen Roche, founder of Orcam Financial Group. “I think she’s going to be a really superb Fed chief. She’s going to continue a lot of what Bernanke started.”
Fears that Yellen — the first woman to hold the post — would somehow undo the fragile stability that has kept markets buoyant helped turn markets south in January.
The main criticism of Yellen was that, as a Democrat, she would come in with a dovish message about interest rates, promising to keep them on hold for a long time due to continued weaknesses in the job force.
“She didn’t do that; she was very balanced,” said Nomura economist Lewis Alexander.
Yellen said she anticipated the recovery would continue, predicting that “economic activity and employment will expand at a moderate pace this year and next, the unemployment rate will continue to decline toward its longer-run sustainable level, and inflation will move back toward 2 percent over coming years.”
Yellen withstood tough grilling from some Republicans on the committee but held her own — at one point sparring heatedly with Rep. Michele Bachmann (R-Minn.) over the independence of the Fed.
“As the hearing went on, people started to be more comfortable and see this woman is not some rookie [who] doesn’t know what she’s doing. She’s a veteran who’s well versed in all these matters,” Roche said.
“If anything today, she proved that shes a very good communicator,” he added.