Happy hump day. Today we’re covering Jerome Powell’s latest stoic commentary, the imminent inflation report, JD Vance’s AI vision, and more. First time reading? Join 190,000 self-directed investors gaining an edge every morning. Sign up here. 

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Powell’s messaging and inflation remain unchanged

The only thing Jerome Powell revealed to lawmakers on Tuesday was that he doesn’t have much to say. Part of that stems from just how stubborn inflation has been.

The Federal Reserve Chairman, stoic as ever, told senators little about what comes next for monetary policy.

He reiterated his team’s position that the central bank is not in a rush to cut interest rates and that the economy remains in solid shape — two ideas that have become boilerplate Fedspeak over recent months. 

“We’re in a pretty good place with this economy,” Powell told Congress on his first day of a two-day testimony.

“We want to make more progress on inflation, and we think our policy rate is in a good place, and we don’t see any reason to be in a hurry to reduce it further.” 

After 100 basis points of rate cuts to end 2024, the Fed kept its benchmark rate unchanged in January. 

Traders now assign a 95.5% chance of no move in March as well, according to CME data. That’s up from 92% before Powell’s comments and higher than the 83% seen a week ago.

Markets anticipate the most likely outcome this year being one single rate cut, coming in September. 

Those odds could shift following the January consumer price index report, due at 8:30 a.m. ET Wednesday. 

FactSet estimates show Wall Street doesn’t expect much to change on headline inflation, which hovers nearly 50% above the Fed’s 2% target: 

Core CPI is similarly seen accelerating to 3.2% year-over-year, matching December’s pace. 

To be sure, inflation has consistently come in hot in January since the onset of the pandemic. Seasonal factors, too, like wage increases and climbing business expenses, could also elevate the numbers more versus other months.

Meanwhile, analysts don’t expect to see any inflationary impact of tariffs in the numbers, though that risk remains top of mind for both the ivory tower and consumers, as recent surveys have shown.

Still, any price increases front-running tariffs are more likely to show up Thursday, when January’s producer price index comes due. 

In any case, the NFIB Small Business Survey, released Tuesday, reflected Powell’s indication that the economy is overall holding solid. Respondents revealed optimism remains at multi-year highs and the outlook on hiring and sales expectations are robust. 

Notably, small business owners’ reported the easiest conditions in obtaining credit since the pandemic — when interest rates were far lower. 

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Elsewhere:

🇺🇸VP Vance wants chips made in the USA. The Trump Administration is looking to relax regulations around AI and tech to clear the way for rapid innovation, Vance explained in a speech in Paris Tuesday. Shares of US chip giant Intel soared following his promises to “safeguard America’s advantage” in tech. (Barron’s)

🏦 Trump advisors aim to consolidate financial regulators. Senior officials are discussing ways to circumvent Congress to merge the Federal Deposit Insurance Corp. into the Treasury Department. They may also squish together the FDIC’s regulator role with the Office of the Comptroller of the Currency. (WSJ)

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