Federal Reserve Chairwoman Janet Yellen said she will step down from its Board of Governors once her successor is sworn into the office, widening the scope for President Donald Trump to shape the U.S. central bank’s leadership for years to come.
Trump has nominated Jerome Powell to replace Yellen, 71, when her term ends in February, though his chairmanship is still subject to Senate confirmation. That move bucked a long-standing tradition of presidents reappointing their predecessor’s Fed pick.
“As I prepare to leave the Board, I am gratified that the financial system is much stronger than a decade ago, better able to withstand future bouts of instability and continue supporting the economic aspirations of American families and businesses,” Yellen, the first woman to lead the U.S. central bank, wrote Monday in her letter of resignation to Trump.
Her decision to leave will give Trump a fourth spot to fill on the Fed’s seven-person Board of Governors in Washington, including a vice chairman spot. The White House has said that Trump is focused on making a selection for that position this year.
“There is some degree of urgency,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York. “Four is problematic, three is probably not workable for very long, on the Board—there’s just too much else to do aside from monetary policy.”
Fed governors lead a number of internal working committees on areas including banking supervision, consumer affairs and the U.S. payments system. Leaving seats unfilled for a prolonged period could slow progress on this work, while also diluting the number of votes that governors have on setting the U.S. cost of borrowing. Five of the 12 regional Fed presidents vote on policy every year.
“You would think that the administration would be eager to make its mark on the Board,” Stanley said.
Yellen has presided over almost four straight years of steady economic growth, sluggish inflation and a jobless rate that has fallen even as she directed the gradual exit from crisis-era policies. On her watch, the Fed halted a controversial bond-buying campaign, lifted interest rates off zero, and began to unwind its $4.5 trillion balance sheet.
“Sustaining this progress will require continued monitoring of, and decisive responses to, newly emerging threats to financial and economic stability,” she wrote.
Yellen could have stayed on as a governor even after stepping down as the institution’s leader, because her term as governor does not end until January 31, 2024, though such a decision would have been unexpected.
“I am confident that my successor as chair, Jerome Powell, is deeply committed to that mission and I will do my utmost to ensure a smooth transition,” Yellen wrote.
In a long career of public service, Yellen served as vice chair of the Board of Governors from 2010 to 2014 before becoming chair. She’s previously been the head of the San Francisco Fed and chair of Bill Clinton’s Council of Economic Advisers, and she’s a professor emerita at the University of California at Berkeley.
“Janet Yellen will go down in history as a terrific Fed chair who was removed from office for purely political reasons, but whose monetary policies—I predict—were then continued by her successor,” former Fed Vice Chairman Alan Blinder wrote in an email. “She deftly engineered—both in Fed actions and in Fed communications—the early stages of a gradual retreat from the super-expansionary monetary policies left to her.”