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Yellen seen as likely next Fed chair despite Summers chatter: Reuters poll

Federal Reserve Vice Chair Janet Yellen addresses the 29th National Association for Business Economics Policy Conference in Washington March
Federal Reserve Vice Chair Janet Yellen addresses the 29th National Association for Business Economics Policy Conference in Washington March

By Jonathan Spicer

NEW YORK (Reuters) - Janet Yellen is still seen as the most likely successor to U.S. Federal Reserve Chairman Ben Bernanke, according to a Reuters poll of economists, despite a swell of speculation in recent weeks that Lawrence Summers might have the inside track.

The poll, released Wednesday, found that 26 out of 39 economists predicted that Yellen, the Fed's current vice chairman, would take the reins at the U.S. central bank in February, 2014. Only eight thought the job would go to Summers, a former U.S. Treasury secretary.

Still, some have had second thoughts on Yellen.

Eight of the economists who saw her as the most likely candidate when polled in June have since changed their mind, with four switching to Summers and a few others choosing longer-shot names to head the world's most influential central bank.

Bernanke's term expires January 31 and President Barack Obama - who is expected to make the choice in the fall - has been clear he will not serve a third term. Obama cited only Yellen and Summers last week when discussing his pending decision, though he added there was a range of good candidates.

While Bernanke steered a battered U.S. economy through the financial crisis and deep 2007-2009 recession, the next Fed chief will deal with a recovery that has yet to gain pace. In the coming months and years the Fed will also have to delicately unwind the unconventional policies, such as trillions of dollars in bond-buying, that were employed to stimulate growth.

The poll, conducted late last week and early this week, found support for Yellen was even more decisive when economists were asked their preference for the next Fed chair, with 23 of 33 respondents choosing her and only one backing Summers.

"I think Yellen is a done deal," said Evariste Lefeuvre, chief economist for the Americas at Natixis North America, which participated in the poll. "We don't need at this stage in the recovery a shock; we need a smooth transition."

Both Yellen and Summers are well respected economists.

Yellen, the former president of the San Francisco Fed Bank, is a monetary policy dove who has strongly defended Bernanke's aggressive moves to spur growth and ratchet down unemployment, which stood at a still high but improved 7.4 percent last month. She would be the first woman to lead the Fed.

Summers, a former top adviser to Obama who as Treasury Secretary during the Clinton administration helped tame the Asian financial crisis, has spoken out far less about current policies. Still he is seen as supportive of accommodation, though perhaps not as wedded to quantitative easing, or QE, in which the Fed now buys $85 billion in assets each month.

While Yellen has been the favorite for the top job from the beginning, online bookmaker Paddy Power on Tuesday showed that Summers is now the odds-on contender. Betters gave him about a 48 percent chance of becoming Fed chairman.

Steven Ricchiuto, chief economist at MSUSA, says he now sees Summers as the likely candidate in part because he "would be a public supporter of an activist fiscal policy." Obama "favors this approach and having an ally at the Fed would be seen as increasing the pressure on Congress to go along with the Administration's policies," he wrote in a client note.

Still, some liberals blame Summers for spearheading the financial deregulation that led to the crisis. About 20 Democratic senators have already signed a letter to Obama in support of Yellen as the next Fed chief.

The Reuters poll also found some support for outside contenders Donald Kohn and Roger Ferguson, who have both served as vice chairmen at the Fed. Kohn got the nod from three economists while Ferguson received two votes.

The next Fed chairman requires Senate confirmation. Obama is expected to announce his choice in late September or October in order to give senators ample time to deliberate.

The economists surveyed for the Reuters poll were from banks, research institutions and asset managers based in the United States, Canada and Europe.

(Additional reporting by Shaloo Shrivastava Editing by W Simon)

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