Overnight Finance: Fed holds rates steady

Quick Q – – > Remember the time when a presidential debate made no mention of the Federal Reserve the night before its most important post-crisis announcement?

TOMORROW STARTS TONIGHT: COMMUNICATION BREAKDOWN? Federal Reserve Chairwoman Janet Yellen ascended to arguably the most powerful policy position in the world in part because supporters insisted she could best communicate the central bank’s dual mandate of high employment and sustainable growth. Regardless of your opinion on Yellen & co.’s decision today not to raise rates — there is no question the Fed’s jumbled communication created much uncertainty ahead of today’s decision.

{mosads}Critics say central bank policymakers have grossly underestimated the public’s frustration and anger since the 2008 collapse. And policymakers’ messages on how the Fed plans to navigate the unchartered waters ahead comes as grassroots groups on both the left and the right take aim at the bank.

It’s not just Republicans attacking the Fed. Outside the Washington bank, dozens of liberal protestors ascended onto the sidewalk denouncing the Fed. One protestor held a sign quoting Pope Francis on income inequality; another with a sign: “Do Black Lives Matter to the Fed?”

— Reuters: “The Federal Reserve held interest rates near zero on Thursday, raising questions over how it will ever manage to lift them off the floor and how effectively it will communicate plans to do so. Only just over half economists polled have predicted such an outcome, a rare occurrence, and a sign of just how hard it has become to read the Fed these days. Prior to the rate decision, Fed Chair Janet Yellen had not spoken in almost two months. Two of her closest allies had spoken late last month but delivered seemingly contradictory messages just days apart.

“The issue appears to be how Yellen manages the rate setting body. Like her predecessor Ben Bernanke she listens to others before speaking at the open markets committee and she appears to value forming consensus, shown by the fact that there was just one dissent in Thursday’s vote. The language used by the Fed is aimed at giving it a high degree of flexibility when it comes to rate decisions. That may now be a weakness when it comes to communicating where the Fed is in situations in which it might need to pivot in response to developments such as the recent market turmoil in China and beyond, possibly leading to continued volatility in financial markets.” http://reut.rs/1OAgwAw

— YELLEN: CONGRESS PLAYED NO ROLE IN DECISION. The Hill’s Pete Schroeder: The Federal Reserve considers a lot of factors when setting interest rates, but a potential government shutdown is not one of them. Federal Reserve Chairwoman Janet Yellen said the central bank’s Thursday decision to hold off on raising interest rates was not driven in the least by a potential shutdown of the federal government caused by a fiscal standoff in Congress. “It played absolutely no role in our decision,” she told reporters. “To me, that’s Congress’s job.”

THIS IS OVERNIGHT FINANCE, what a week, wonks. Tweet: @kevcirilli; email: kcirilli@digital-stage.thehill.com; and subscribe: http://digital-stage.thehill.com/signup/48.

CLINTON USES BIDEN TO DEFEND VOTE, via WSJ: “LACONIA, N.H. –Hillary Clinton defended her vote for a controversial bankruptcy bill reviled by the left on Thursday, and said she did so at the insistence of then-Sen. Joe Biden, who just happens to be considering challenging her for the Democratic presidential nomination. Her comments suggest how the Clinton campaign might respond if Mr. Biden decides to run, and highlights the challenges the vice president would have in appealing to liberals in the party. His record includes many of the centrist policies and compromises that progressives reject.” http://on.wsj.com/1Je3BgN

AYOTTE TO CRUZ: WHAT’S YOUR SHUTDOWN END GAME? Sarah Ferris: Sen. Kelly Ayotte (N.H.) is pressing fellow Republican Sen. Ted Cruz (Texas) to reveal his “strategy for success” as he risks a government shutdown in an attempt to end federal funding of Planned Parenthood. In a letter to Cruz on Thursday, Ayotte demanded to know why the firebrand Texas senator — and presidential candidate — is so strongly pushing legislation that the party can’t pass. http://bit.ly/1KtziYF

HOUSE GOP LEADERS: WE’LL GET BLAMED FOR SHUTDOWN. Rebecca Shabad and Peter Sullivan: “House GOP leaders are trying to convince their rank and file it would be a bad move to risk a government shutdown over blocking funding for Planned Parenthood. At a closed-door conference meeting on Thursday morning, leadership presented their members with polling data from the House GOP’s campaign arm showing Republicans would be blamed for a government shutdown.” http://bit.ly/1MtD4U9

DEMS UNITE: From The Hill’s Jordan Fabian: “President Obama and Democratic leaders in Congress want to pass a clean, stopgap bill to avert a government shutdown and allow negotiators more time to reach a long-term budget deal. Senate Majority Leader Harry Reid (D-Nev.) made the announcement after meeting at the White House with Obama and House Minority Leader Nancy Pelosi (D-Calif.) to plot their strategy on the spending talks…

“‘The three of us agree that we want a short-term CR,’ Reid told reporters after the 90-minute huddle in the Oval Office. ‘We want to make sure the riders are off that, we want to make sure the government will be running.’ The top Democrats sought to present a united front in the contentious budget battle, even as Reid and Pelosi extended an olive branch to their Republican counterparts, Senate Majority Leader Mitch McConnell (Ky.) and Speaker John Boehner (Ohio), to sit down and hammer out a comprehensive budget agreement.” http://bit.ly/1UYjPkN

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