Crypto News: ‘Hawkish tilt’

Donald Trump has spent his second term pushing for Federal Reserve rate cuts he hopes will reignite an economy that a few years ago boasted unemployment lower than at any time since the Nixon administration.

A lot of that effort has focused on trying to push out the central bank's current members with insults, threats, attempted firings and even an unprecedented criminal probe by his Justice Department. But even now, Fed officials are signaling renewed worries over inflation, with "several" policymakers suggesting the central bank may need to raise interest rates again.

"Several participants" said they would have preferred a statement that surfaced the possibility of raising the funds rate "if inflation remains at above-target levels," minutes of the central bank's Jan. 27-28 policy meeting showed.

That could put the Fed on a collision course not only with Trump, but his handpicked successor to be the next Fed chair. "The minutes carry a distinctly more hawkish tilt," Gregory Daco, chief economist at EY-Parthenon, wrote in a note to clients. "This sets up an interesting dynamic if and when Kevin Warsh is confirmed as Fed chair." —David E. Rovella

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Strangely enough, traders in US interest-rate options have piled into positions that would profit from the Fed actually cutting rates sooner and more aggressively than investors currently expect.

As trading resumed Tuesday after the long Presidents Day weekend, there was heavy buying of call options on futures on the Secured Overnight Financing Rate—an overnight interest rate tied to the Fed's short-term benchmark—as well as options on Treasury note and bond futures, market data shows. The options would profit from a rally.

"My personal interpretation," said Alex Manzara, a derivatives broker at R.J. O'Brien & Associates, "is that someone who is pretty smart is inhaling calls because they think a problem could be on the horizon that causes the Fed to be much more aggressive in terms of rate cuts than the market is currently pricing."

Aside from the threat of wiping out whole industries or someday cratering the stock market and the broader economy, one tangible consequence of artificial intelligence is rising power bills. Americans are seeing utility expenses climb alongside those chip-filled boxes sprouting on the side of the highway.

Illinois Governor JB Pritzker has apparently had enough of this dynamic, and wants to temporarily halt incentives for data centers in a bid to contain soaring power bills. The Democrat said he wants to implement a two-year moratorium on new state-issued tax credits for data centers. He also urged the PJM Interconnection, the largest grid operator in the US, to take steps to make large energy customers pay their fair share.

Illinois is not the first state to seek to rein in expensive power bills. New Jersey's new governor, Mikie Sherrill, issued executive orders calling a state of emergency and pausing new utility rate increases after the Democrat was sworn into office last month. The move will enable New Jersey to block utilities from increasing how much they charge for certain services while the state accelerates new power generation.

Europe

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Mexican President Claudia Sheinbaum's flagship pro-investment program—touted as the economic antidote to Trump's trade war—is struggling to get off the ground.

Disappointing results are everywhere, government data shows. Business confidence levels that were already pessimistic fell even further in January. A gauge of how much companies and the government are investing in construction, machinery and technology is posting annual declines. More broadly, economists see Mexico's gross domestic product growing just 1.4% this year, inching up from 0.5% in 2025.

In private, the president is growing concerned that the so-called Plan México is falling flat. Uncertainty is also rising as she prepares to review the North American trade agreement, with her mercurial US colleague musing about exiting the very pact he entered.

Mexico's President Claudia Sheinbaum speaking during her daily press conference at Palacio Nacional in Mexico City on Jan. 29. Photographer: Alfredo Estrella/AFP/Getty Images

The Epstein Files

Billionaire Wexner Says He Visited Epstein's Private Island

The 88-year-old was the former longtime chief executive of L Brands, which over the years owned the Victoria's Secret, Bath & Body Works, and Abercrombie & Fitch stores.

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European Central Bank chief Christine Lagarde may leave her post before the end of her term, allowing a successor to be appointed before a potential far-right victory in French presidential elections in 2027.

The Financial Times reported Wednesday that Lagarde wants to enable Macron and German Chancellor Friedrich Merz to find her replacement, without indicating when she may exit. The ECB said that Lagarde is "totally focused on her mission" and has not made any decisions about her end of term.

Speculation about a departure has swirled around her for some time, but increased after Bank of France chief Francois Villeroy de Galhau, who also sits on the ECB's Governing Council, recently announced his early exit. That leaves the selection of his replacement to Macron, rather than any successor from Marine Le Pen's National Rally.

This is how a Lagarde replacement would be selected.