Dovish Yellen Calls for ‘Big’ Stimulus & No Change in Low-Interest Rates for a Long Time; Good for Risk

During her confirmation hearing held by the Senate Finance Committee on Tuesday, Treasury Secretary-nominee Janet Yellen dropped some dovish bombs as she said America needs to “act big” to protect itself from long-term effects with a major stimulus package.

“Right now, short term, I feel that we can afford what it takes to get the economy back on its feet, to get us through the pandemic,” said Yellen, who could be confirmed as soon as Thursday.

Yellen told the panel that the next economic package is a “top priority,” and she’ll be working with the Biden administration on this rescue aid “to get through these dark times.”

Yellen, 74, will be the first woman to be Treasury secretary in the nation's history to also become the first person to hold all three top economic posts — chair of the president’s Council of Economic Advisers, chair of the Federal Reserve, and head of Treasury.

Historic Lows

Yellen said that help for small businesses and the unemployed would provide the “biggest bang for the buck” and urged lawmakers to “act big” in efforts to rescue the economy. According to her, this is the “smartest thing” when interest rates are at “historic lows.”

And while it is “essential” that the federal budget is on a sustainable path, if investments aren’t made to support economic growth, the situation will be worse.

“There is an advantage to funding the debt, especially when interest rates are very low by issuing long-term debt,” Yellen said. As for a 50-year bond, she would look at “what the market would be like for bonds of that maturity.”

She further expects that low yields are here to stay and won’t be increased anytime soon, sharing similar views as Federal Reserve Jerome Powell. Yellen said,

“The world has changed — I believe the future is likely to bring low interest rates for a long time.”

“But of course, it is a risk that interest rates can rise, and we need to consider that risk as well in crafting a sustainable and responsible policy.”

Greenback Continues to Lose

When it comes to the US dollar, Yellen didn't endorse a “strong dollar” specifically but said the US “does not seek a weaker currency to gain competitive advantage.”

Also, the Biden administration is prepared to take on China’s “abusive” trade and economic practices that include dumping products, erecting trade barriers, and giving illegal subsidies to corporations to undercut American companies; she added they would “use the full array of tools” to address these issues.

Additionally, Yellen said recession “disproportionately hit the service sector” and had a particularly “brutal” impact on minorities and women.

Although her comments saw a small drop in the price of Bitcoin and cryptocurrency, dovish Yellen is good for risk, said trader and economist Alex Kruger. Unlike the red in the crypto market, S&P 500 and gold saw a slight jump while the greenback went down.