WHEN: Today, Monday, November 22, 2021
WHERE: CNBC's "Closing Bell"
Following is the unofficial transcript of a CNBC exclusive interview with United States Treasury Secretary Janet Yellen on CNBC's "Closing Bell" (M-F, 3PM-5PM ET) today, Monday, November 22nd. Following are links to video on CNBC.com: https://www.cnbc.com/video/2021/11/22/janet-yellen-on-powells-re-nomination-im-very-pleased-with-the-presidents-choice.html
All references must be sourced to CNBC.
SARA EISEN: Let's get straight to the big news of the day. President Biden's choice to renominate Jerome Powell for a second term as Federal Reserve Chair. Joining us exclusively for her first reaction to the news is Treasury Secretary Janet Yellen, who of course served herself as Fed Chair from 2014 to 2018. It's great to see you Treasury Secretary Yellen, thank you for joining us.
TREASURY SECRETARY JANET YELLEN: Thanks for having me.
EISEN: So, the president followed your advice. What did you recommend to him on this front?
YELLEN: Well look, I don't want to say what I recommended, but I surely will say that I'm very pleased with his choice. I had the pleasure of working very closely with both Jay Powell and Lael Brainard and they are consummate professionals, support an independent Fed, are completely committed to the Fed's dual mandate of maximum employment and price stability and have amassed tremendous records. I have confidence in them, and I believe they'll have broad support among Congress and the public and can be counted on to do an excellent job.
EISEN: It does seem that Fed Chair Powell will have no problem getting confirmed. He's got bipartisan support, but we did hear from Senator Elizabeth Warren who had called him, "a dangerous man." She's going to vote against him and she cited failures on regulation, climate and ethics. Why is she wrong?
YELLEN: Well look, on regulation you have the Chair Powell, Powell has the endorsement of Barney Frank and Chris Dodd, the authors of Dodd-Frank. He's clearly someone who adheres to the core reforms that were put in place and has been supportive of them and they have basically said that they see that and feel he's the best person to lead the Fed and I concur. I concur with that decision. We will be nominating a vice chair for supervision and Dodd-Frank gives that person a significant responsibility in supervision. Chair Powell has said he'll be supportive of letting that person take the lead.
YELLEN: On climate—
EISEN: We heard the announcement. Oh, go ahead. Sorry didn't mean to cut you off.
YELLEN: On climate, the Fed has made considerable strides on bringing a valuation of how climate risks affect the banks and supervises. It's doing very good work on that and is gearing up I think to do scenario analysis of the risks facing the banks and he used it in supervision.
EISEN: Yeah, that could be a slippery slope going forward if the Fed gets more involved in, in climate. Secretary Yellen, I did want to ask you of course about inflation because we heard that from President Biden today in the announcement, from Lael Brainard, from Jay Powell. Is the administration getting more concerned at this point about inflation?
YELLEN: Well, I think we do have to be concerned about inflation. It's reached the level that concerns most Americans who are seeing it in their pocketbook when they go to the store to buy food or to fill up their cars at the pump. I think it's partly a reflection of the fact that pandemic has had a severe influence in our economy, and it's part of demand supply imbalance and getting on track but the administration, the White House is doing everything we can to address supply chain bottlenecks that are boosting prices and over the longer run, the Fed needs to play an important role to make sure that this doesn't become endemic. And I know they can be counted on to do that.
EISEN: Should the Fed, should Powell continue to prioritize the improvement in jobs? They're still more than 4 million loss since the pandemic over inflation because that's been the policy so far, but many are calling for it to change.
YELLEN: Well, I'm not going to weigh in on the details of Fed policy. The Fed's mandate involves low and stable inflation over the longer term and also maximum employment. They put in place a new framework for how to handle the balancing of these two mandates and detailed questions of tactics and timing. I think we can leave to the Fed. I have confidence in their ability to make good judgments there.
EISEN: Okay, so I'll ask you an economic outlook question then. If the Fed does get a little more, if the Fed acts quicker to taper, pare back its stimulus and acts quicker to raise interest rates, does that risk a recession or choking off the growth?
YELLEN: Well, I see the US economy being on a strong growth spurt at the moment. Unemployment has been falling fast. We've seen over 500,000 jobs a month since President Biden was elected and I think that's going to continue into next year driving down unemployment. So, you know, there's strong support for economic growth that's coming from policy and from the buffer stock of savings households have built up so it's up to the Fed to decide just how much monetary policy support is necessary, given those other factors.
EISEN: The dollar, right now, Secretary Yellen, is trading at the highest level since July 2020. Does that comfort you a little in terms of taming inflation or do you worry about the impact that's going to have on growth like exports and corporate profits?
YELLEN: Well, as I said, I think growth is poised to be very strong over the coming year and unemployment to decline. But I think what we do see in the marketplace with the strong dollar in generally low, longer term interest rates is confidence that inflation is not something that is going to become long lasting or endemic in the US economy and that's important.
EISEN: We talked a bit about climate change, and it is something that President Biden mentioned in his pick, and you mentioned that the Fed is going to pay a little closer attention to it though it could be a little bit controversial if the Fed gets into this, politicization of the Fed, confusion of the mandate. What should the Federal Reserve's role be in fighting climate change?
YELLEN: Well, you know as Chair of FSOC, I call together all of the regulators, the banking and other financial regulators to discuss the importance of taking climate change into account in supervision and regulation of financial institutions. Climate change poses a major risk to financial institutions and to the financial stability of our economy and in the safety and soundness supervision that it does, just as the Fed analyzes through its regular stress tests to make sure that banks have enough capital and adequate risk management to deal with threats coming from financial market risks. Climate change needs to be added to that mix and that's exactly what the Fed is doing is gearing up to do that kind of analysis so that it can make sure that banks understand those risks and manage them properly and effectively.
EISEN: We know you have a very busy agenda today so thank you so much for taking the time to talk to us on this historic day. Treasury Secretary Janet Yellen, thank you.