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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

Dion Rabouin, author of Markets
Jan 29, 2021 - Economy & Business

The state of the U.S. economy after one year of the coronavirus

Source: St. Louis Fed; Billions of chained 2012 dollars; Chart: Axios Visuals

The U.S. economy shrank by 3.5% last year, the Commerce Department reported, with the country seeing both its largest quarterly GDP decline and its largest quarterly GDP increase in the second and third quarters, respectively.

Where it stands: The 3.5% decline is the worst year for the U.S. since at least the end of World War II, and the economy is more than $473 billion smaller than it was before the pandemic hit.

Ina Fried, author of Login
32 mins ago - Technology

Intel CEO sees making own chips as a matter of national security

Pat Gelsinger. Photo: Axios on HBO

Intel CEO Pat Gelsinger is putting the pressure on the U.S. government to help subsidize chip manufacturing, insisting the current reliance on plants in Taiwan and Korea as "geopolitically unstable."

Why it matters: There is bipartisan support for funding the domestic semiconductor industry, but Congress has yet to sign the check. The Senate has passed the CHIPS Act that includes $52 billion in semiconductor investment, but it has yet to pass the House.

Updated 35 mins ago - World

17 U.S. and Canadian missionaries kidnapped in Haiti

Haitian soldiers guard the public prosecutor's office in Port-au-Prince this month. Photo: Richard Pierrin/AFP via Getty Images

Children are among a group of 17 missionaries kidnapped in Port-au-Prince, Haiti, per a statement from Christian Aid Ministries Sunday.

The latest: "The group of 16 U.S citizens and one Canadian citizen includes five men, seven women, and five children," the Ohio-based group said. Haitian police inspector Frantz Champagne on Sunday identified the 400 Mawozo gang as the group responsible, in a statement to AP.

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