What Janet Yellen Didn’t Say: The B-Word

Appearing at a luncheon of the Economic Club of New York on Wednesday, Janet Yellen, the new head of the Federal Reserve, gave her first big speech on monetary policy, and, in some ways, a fine address it was. Yellen reiterated that there is still a good deal of slack in the labor market, and that the headline unemployment rate isn’t necessarily a reliable indicator. She said that low inflation and the threat of deflation were currently a bigger threat than rapidly rising prices. And, after comments last month that confused the markets, she gave every indication that the Fed would most likely keep interest rates at very low levels for a good time to come.

So far, so good. But what was most striking to me about Yellen’s remarks was that she didn’t even discuss the financial markets and the overriding need to avoid another damaging speculative bubble, like the ones that the American economy experienced in the late nineteen-nineties and mid-two-thousands. Indeed, Yellen didn’t use the B-word at all. Given that her immediate predecessors, Alan Greenspan and Ben Bernanke, will be remembered for, among other things, their roles in inflating the bubbles in the stock market and the housing market, that was a pretty remarkable omission.

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