If he succeeds Ben Bernanke as chairman of the Federal Reserve Board, as many insiders now believe he will, Lawrence Summers is expected to be more “hawkish” in reining in the Fed’s quantitative easing program (“QE3″) than his rival for the post, Janet Yellen. That’s according to a report by the New York Times’ Binyamin Appelbaum on CNBC.com.
Yellen, an economist who’s done a couple of separate stints on the Federal Reserve Board during the last two decades, is a known quantity. Summers, who was President Bill Clinton’s Treasury secretary and has been an adviser to President Barack Obama, is thought to be Obama’s first pick to succeed Bernanke.
Although Summers has been an advocate for stimulus spending, less is known about his views on monetary policy. Unlike Yellen, there’s no Fed track record to study. QE3, the Fed’s $85 billion-a-month bond and mortgage-backed-securities buying program, has helped keep mortgage rates low, but some economists worry it will spur inflation if carried on for too long. Bernanke has said the Fed could start winding down QE3 this year, and shut the program down altogether next year if unemployment continues to decline.
“People don’t know what Larry might do,” PIMCO CEO Mohamed El-Erian tells Appelbaum. “There’s a lack of a lot of information on Larry’s views. We don’t have enough information to make an assessment, just some second- and thirdhand accounts.” Source: cnbc.com.