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All eyes on Federal Reserve chair Jerome Powell as interest rates creep higher

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.

Schumer: Trump impeachment trial to start week of Feb. 8

The Senate will begin former President Trump's impeachment trial the week of Feb. 8, Majority Leader Chuck Schumer announced Friday on the Senate floor.

Why it matters: Trump is the only president in U.S. history to be impeached twice for “incitement of insurrection" after a violent pro-Trump mob breached the U.S. Capitol, resulting in five deaths.

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CDC shifts COVID vaccine guidance, expanding minimum interval between doses for exceptional cases

Patients can space out the two doses of the coronavirus vaccine by up to six weeks if it’s "not feasible" to follow the shorter recommended window, according to updated guidance from the Centers for Disease and Control and Prevention.

Driving the news: With the prospect of vaccine shortages and a low likelihood that supply will expand before April, the latest changes could provide a path to vaccinate more Americans — a top priority for President Biden.

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Texas attorney general sues Biden administration over deportation freeze

Texas Attorney General Ken Paxton is suing the Biden administration in federal district court over its 100-day freeze on deporting unauthorized immigrants, and asking for a temporary restraining order.

Between the lines: The freeze went into effect Friday, temporarily halting most immigration enforcement in the U.S. In the lawsuit, Paxton claims the move "violates the U.S. Constitution, federal immigration and administrative law, and a contractual agreement between Texas" and the Department of Homeland Security.

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Biden administration unveils 3-pronged plan to combat domestic extremism

White House press secretary Jen Psaki announced at a briefing on Friday that the Biden administration will roll out a three-pronged, interagency plan to assess and combat the thread by domestic violence extremism.

Why it matters: The federal government's approach to domestic extremism has come under scrutiny in the wake of the Jan. 6 attacks on the Capitol by a pro-Trump mob. In his inaugural address, Biden repudiated political extremism, white supremacy and domestic terrorism, vowing to defeat them.

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Senate confirms retired Gen. Lloyd Austin as defense secretary

The Senate voted 93-2 on Friday to confirm retired Gen. Lloyd Austin as secretary of defense. Sens. Mike Lee (R-Utah) and Josh Hawley (R-Mo.) were the sole "no" votes.

Why it matters: Austin is the first Black American to lead the Pentagon and President Biden's second Cabinet nominee to be confirmed.

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House will transmit article of impeachment to Senate on Monday, Schumer says

Senate Majority Leader Chuck Schumer (D-N.Y.) announced that the House will deliver the article of impeachment against former President Trump for "incitement of insurrection" on Monday.

Why it matters: The Senate is constitutionally required to begin the impeachment trial at 1 p.m. the day after the article is transmitted. Minority Leader Mitch McConnell (R-Ky.) had been pushing for the trial to begin in mid-February, arguing that it will force the Senate to delay other important business.

This story is breaking news. Please check back for updates.

Private equity bets on delayed tax reform in Biden administration

In normal times, private equity would be nervous about Democratic Party control of both the White House and Congress. But in pandemic-consumed 2021, the industry seems sanguine.

Driving the news: Industry executives and lobbyists paid very close attention to Treasury Secretary nominee Janet Yellen's confirmation hearings this week, and came away convinced that tax reform isn't on the near-term agenda.

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New Energy Department roles look to animate Biden's campaign themes

The burst of Biden administration staffing picks announced yesterday revealed that the Energy Department (DOE) has newly created roles that reflect what President Biden called campaign priorities.

Driving the news: One new position is "director of energy jobs," which is being filled by Jennifer Jean Kropke. She was previously the first director of workforce and environmental engagement with Local 11 of the International Brotherhood of Electrical Workers.

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