And in 1995 she said during a debate on inflation targeting that “when the goals conflict and it comes to calling for tough trade-offs, to me, a wise and humane policy is occasionally to let inflation rise even when inflation is running above target.” This helps to explain why, even in the Bernanke era, Ms. Yellen has often pushed behind the scenes for even more aggressive bond purchases.
Ms. Yellen’s defenders says she really isn’t a dove and they point to her 2006 warning about a housing bubble and its risks for the larger economy. Full marks for that. But the problem is that by 2006 the mortgage-securities and housing bubbles were so large and distended that substantial economic harm was inevitable. The time for the Fed to have begun tightening was in 2003 and 2004 when it was keeping interest rates at 1%-2% even as the economy was growing by nearly 4% a year and commodity prices were exploding. Ms. Yellen was no great public dissenter from that historic Greenspan-Bernanke mistake.
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