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Federal Reserve chairman Jerome Powell. Photo: Alex Wong/Getty Images

With long-term U.S. interest rates creeping higher and the stock market rally looking increasingly bubblicious, market participants will have a keen eye on remarks by Fed chair Jerome Powell today at Princeton University.

Why it matters: The uncertainty created by the coronavirus pandemic, volatility in financial markets and diverging opinions about the future of monetary policy from Fed policymakers have investors hungry for guidance.

What's happening: Minutes from the Fed's latest policy-setting meeting and comments from various members of the FOMC in recent days have suggested the central bank could begin reducing its massive quantitative easing program — which has provided significant confidence to stock and bond investors — by the end of the year.

  • While comments from other members of the committee have suggested the central bank will be buying bonds for much longer.

What they're saying: "I could see, potentially, that occurring at the very end of 2021 or early 2022," Philadelphia Fed president Patrick Harker said of reducing the Fed's bond buys in a speech last week.

  • Atlanta Fed president Raphael Bostic told reporters on Monday he was “open to” tapering bond buys later this year.
  • "I would hope it might be this year,” Dallas Fed chief Robert Kaplan said Monday.

On the other side: In an effort to tamp down on all the tapering talk, two of the Fed's heavy hitters, seen as closest to Powell, made clear we would be here for a while.

  • "We are not going to lift off until we get inflation at 2% for a year. ... We are trying to tie our hands," Fed vice chair Richard Clarida said Wednesday.
  • The U.S. economy remains “far away” from the Fed’s goals and as a result, the bond-buying program will likely continue for “quite some time,” Fed governor Lael Brainard said on Wednesday.

By the numbers: The Fed is currently buying $120 billion of U.S. Treasury bonds and mortgage-backed securities every month in part to keep yields on U.S. government debt low.

  • Even so, the 10-year Treasury yield has risen by nearly 25 basis points since the start of the year, touching a high of 1.18% earlier this week as investors brace for a pickup in inflation.
  • Ten-year breakeven inflation rates rose as high as 2.11% last week and held steady at 2.06% on Thursday.

Watch this space: The Fed's latest report on business conditions around the country found that a third of the U.S. central bank’s 12 districts reported flat or declining activity in November and December while the majority of districts said activity increased only modestly.

Go deeper

Trump stock market underperformed Obama's

Data: Yahoo Finance; Chart: Andrew Witherspoon/Axios

U.S. stock markets hit record highs during President Trump's time in office, but mostly underperformed his predecessor.

By the numbers: The stock market selloff that followed the outbreak of the coronavirus pandemic wiped out three and a half years' worth of market gains for Trump. As of March 23, 2020, the S&P 500 had lost 1.5% since Trump's first day in office.

Janet Yellen plays down debt, tax hike concerns in confirmation hearing

Treasury Secretary nominee Janet Yellen at an event in December. Photo: Alex Wong via Getty Images

Janet Yellen, Biden's pick to lead the Treasury Department, pushed back against two key concerns from Republican senators at her confirmation hearing on Tuesday: the country's debt and the incoming administration's plans to eventually raise taxes.

Driving the news: Yellen — who's expected to win confirmation — said spending big now will prevent the U.S. from having to dig out of a deeper hole later. She also said the Biden administration's priority right now is coronavirus relief, not raising taxes.

Dave Lawler, author of World
4 mins ago - World

Biden opts for five-year extension of New START nuclear treaty with Russia

Putin at a military parade. Photo: Valya Egorshin/NurPhoto via Getty

President Biden will seek a five-year extension of the New START nuclear arms control pact with Russia before it expires on Feb. 5, senior officials told the Washington Post.

Why it matters: The 2010 treaty is the last remaining constraint on the arsenals of the world's two nuclear superpowers, limiting the number of deployed nuclear warheads and the bombers, missiles and submarines which can deliver them.

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