Here’s what you’ll find in today’s edition:

• Fed Chair Powell headed to the House for another day of Congressional testimony. 

• Inflation came in a bit hot, but don’t panic just yet.

Powell gets grilled on the Hill

Jerome Powell was back on Capitol Hill for his second day of testimony today. 

We do not envy him. Senators yesterday grilled Powell on everything from the dismantling of the CFPB to Trump’s tariff policies, and today was more of the same. 

Since Powell is Powell, he generally kept his answers short and diplomatic, making it particularly exasperating to watch. 

“I think the standard case for free trade and all that logically still makes sense. It didn’t work that well when we have one very large country that doesn’t really play by the rules,” Powell said. We’re thinking he’s talking about China here. 

“And in any case, it’s not the Fed’s job to make or comment on tariff policy.”

Sen. Elizabeth Warren, a key architect of the CFPB’s creation in the aftermath of the 2008 financial crisis, said not having the agency is akin to having “no cop on the beat.” 

Powell agreed that there is no other regulator currently tasked with monitoring banks and ensuring consumer protections. He added, though, that bank accounts are “safe.” 

Over in the House, crypto banking did get a little shoutout in the midst of the CFPB-talk. 

“Are there any backstops that we can use, any firewalls that we can put in place that might insulate the traditional banking system… if we have a collapse of a major crypto issuer?” Rep. Stephen Lynch asked on Tuesday. 

Powell conceded that it’s “appropriate” to make sure banks understand the risks that are involved in crypto activity if they’re taking on these clients, but at the same time “you don’t want to go too far.” 

“In Fed regulated banks, there are lots of crypto activities happening now,” Powell added. “They've just happened under a framework where we made sure that the bank understood, and we understood, exactly what they're doing.” 

In terms of specifics on monetary policy, which was somewhat ironically the least-discussed topic on Tuesday and Wednesday, Powell simply reiterated that the committee will take its time lowering interest rates. 

“We’re in a pretty good place with this economy,” Powell said Tuesday. “We want to make more progress on inflation.” 

Wednesday’s testimony of course came after the latest CPI report showed inflation hit 3% (more on that later). 

Powell told reps that today’s CPI proves that “we are close but not there on inflation.” 

“So we want to keep policy restrictive for now,” he added. 

For those riding the quantitative easing train, it was easy to miss Powell’s quick comment about the practice, but he did make one:

“Quantitative easing is a tool we only use when rates are already at zero,” he said. 

Remember, QE + near zero rates almost always equals pain. Weaker currency, long-term inflation risks, the list goes on. Here’s to hoping we don’t get there. 

— Casey Wagner

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This is the percentage of financial advisors surveyed by CoinShares who said they believe their role is shifting toward risk management as clients independently invest in crypto.

Further, advisors noted that when it comes to recommending crypto, they have to consider the reputational risks in addition to their fiduciary responsibilities.

The first CPI reading of the year came out this morning, showing that inflation picked up for the fourth-straight month in January. The headline figure is up 3% over the year, slightly above what analysts had predicted. 

Month over month, prices across the board are up 0.5%, the biggest month increase since August 2023. The core index, which excludes food and energy prices, is up 0.4% from December. 

The January CPI report is always especially important as it reflects turn-of-the-year price changes. The first month of the year historically brings bigger price increases. 

Shelter costs accounted for almost 30% of the total CPI increase, although some of this increase can be attributed to wildfires in California. Food prices also brought up the headline figure.

The index for food was up 0.4% in January, with meats, poultry, fish and eggs alone gaining 1.9% from December. 

Stocks initially fell on the news but pared losses later in the session. 10-year Treasury yields — a proxy for loans and mortgages — jumped above 4.65%. Odds of a March rate cut went from 5% to 2.5% following the report’s release, according to data from CME Group. 

These inflation figures, while perhaps initially alarming, are not too far off from expectations. Plus, first quarter inflation almost always shows a new year’s bump. Add in the devastating fires in the Los Angeles area and it’s a bit of a perfect storm. We’ll see if the market agrees tomorrow.

— Casey Wagner

• Coinbase is expected to report nearly $1.8 billion in revenue for the fourth quarter of 2024, according to consensus estimates the exchange released today. Official earnings will be reported after the close tomorrow. 

• Trump on Wednesday again called for lower interest rates, saying it “would go hand in hand with upcoming tariffs.” 

• The US on Wednesday said it would release Alexander Vinnik as part of a prisoner exchange with Russia. Vinnik co-founded the BTC-e exchange and was awaiting sentencing after pleading guilty to conspiracy to commit money laundering.