The September head fake by the Federal Reserve on interest rates took many notable economists by surprise. Macroeconomists and investment strategists have experienced a challenging endeavor analyzing Janet Yellen’s “fedspeak.” Back in August, The Wall Street Journal surveyed economists over a 5-day span. According to a survey, 82% believed the Federal Reserve’s first rate increase would have come in September. Conversely, 13% believed the Federal Reserve would wait till December. At this point, Yellen’s been conservative in her bid to eventually raise interest rates. Under her leadership, the board has increased contentions on raising rates, as deciphering economic data and job growth figures are dizzying in an era of QE-backed policy. Yellen is a consensus builder, a trait which will translate into an administration that will take thought-out bets on monetary policy.
Yellen, who took the reins from Ben Bernanke, won the role from Lawrence Summers, the former Treasury Secretary. To some, Summers was abrupt and at times polarizing, which played into Yellen’s favor, as she was more discreet and conciliatory. Yellen was able to gain some senatorial Republican support. Yellen’s duties remain the most influential and important posts in regard to global finance and investments – the center of her agenda is the real economy. Known by peers and colleagues for being prudent, Yellen brings a diverse background to the Fed chair role. Most notably, she is the first woman to hold the position. In addition, Yellen was chair of the White House Council of Economic Advisers during U.S. President Bill Clinton’s administration. After the Clinton era, she returned to UC Berkeley. In 2004, Yellen became president of the Federal Reserve Bank of San Francisco. After Barack Obama’s inauguration, by 2010, Yellen was positioned as vice-chair of the Board of Governors.
What makes Yellen tick? We know that she is influenced by many notable economist, including, and most especially, John Maynard Keynes has profoundly impacted her way of thinking. Keynes idea of governments being able to puppet interest rates, modify government spending and taxes for the sake of preventing depressions linked to modern capitalism resonated with Yellen.