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Janet Yellen and company are cautiously optimistic that the U.S. economy has turned a corner, according to minutes of its December meeting.

The minutes showed that the bank stands ready to raise rates again soon if necessary.

But that could change: If Trump and the Republican Congress decide to pass deficit-financed tax cuts or infrastructure spending, which Fed economists agreed would boost economic growth, inflation could rise as well. That could hasten the expected 3 rate hikes expected to come this year—a cautious pace historically.

Our take: The markets may hang on Janet Yellen's every word, but the Fed chair is waiting for President Trump to make the first move. The minutes showed that Fed officials see the run up in the stock market, the dollar, and interest rates since the presidential election as linked "to expectations for more expansionary fiscal policies in coming years or to possible reductions in corporate tax rates."

Go deeper

Kevin McCarthy's rude awakening

House Minority Leader Kevin McCarthy. Photo: Mark Wilson/Getty Images

Kevin McCarthy is learning you can get torched when you try to make everyone happy, especially after an insurrection.

Why it matters: The House Republican leader had been hoping to use this year to build toward taking the majority in 2022, but his efforts to bridge intra-party divisiveness over the Capitol siege have him taking heat from every direction, eroding his stature both with the public and within his party.

The next big political war: redistricting

Illustration: Aïda Amer/Axios

Democrats are preparing a mix of tech and legal strategies to combat expected gerrymandering by Republicans, who are planning to go on legal offense themselves.

Why it matters: Democrats failed to regain a single state legislature on Election Day, while Republicans upped their control to 30 states' Houses and Senates. In the majority of states, legislatures draw new congressional district lines, which can boost a party's candidates for the next decade.

34 mins ago - Politics & Policy

Vaccinations, relief timing dominate Sweet 16 call

Sen. Joe Manchin (D-W.V.) speaks during a news conference in December with a group of bipartisan lawmakers. Photo: Caroline Brehman/CQ-Roll Call, Inc via Getty Images

Vaccine distribution, pandemic data and a cross-party comity dominated today's virtual meeting between White House officials and a bipartisan group of 16 senators, Senator Angus King told Axios.

Why it matters: Given Democrats' razor-thin majority in both chambers of Congress, President Biden will have to rely heavily on this group of centrist lawmakers — dubbed the "Sweet 16" — to pass any substantial legislation.