Federal Reserve

Yellen to maintain Keynesian slant: Report

Yellen talks to left, prepares to turn right
Yellen talks to left, prepares to turn right

Janet Yellen's strong support of Keynesian economics will likely determine future Federal Reserve policy, the New Yorker reported in an interview with the Fed chair on Monday.

The Keynesian tradition, Yellen told the magazine, and the line of research known as "behavioral finance" have "come out of this crisis with greatly enhanced prestige in academia, and in institutions like [the Federal Reserve]."

Both Yellen and her husband, George Akerlof, were strongly affected by their parents' experiences with unemployment, the New Yorker said, citing papers the couple has published stating that people's economic behavior is not mechanically rational and that the Fed can manage the economy better than the markets.

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Yellen enjoys a ground-level approach, the article said, from interviewing security guards to hearing what every member of the Federal Open Market Committee has to say before an official meeting. But the article said she must move towards economic and political policy in managing the Fed since her ability to depend on personal discussions is disappearing as investors closely follow every conversation she has.

"And so even when the headwinds have diminished to the point where the economy is finally back on track and it's where we want it to be," she told the New Yorker, "it's still going to require an unusually accommodative monetary policy."

Read the full article here.

—By CNBC.com