📍Warsh testifies before Congress: "Inflation is a choice, and the Fed chose to end it"

🔴On 14–15/7, Fed Chair Kevin Warsh held his first semiannual testimony before Congress since taking office. The message throughout was: The mission on inflation is not yet complete.
🔴Warsh vowed to end five years of high inflation, reiterated the 2% target, and affirmed that the FOMC is "unrelenting toward persistent inflation".
CPI released in time for the testimony: -0.4% M/M, Y/Y down to 3.5% from 4.2%, core 2.6%.
-> Warsh said: "Some people look at the data this morning and say the job is done. That is not my view."
🔴Balance sheet: Separate money from fiscal policy
Warsh stressed that he will not use the Fed’s $6.7T balance sheet to help the government borrow cheaply—the Fed having absorbed too many Treasury bonds has blurred the lines between monetary and fiscal.
The Fed’s Treasury holdings have maturities meaningfully longer than the market -> Warsh said this is not okay.
Warsh said any changes will be signaled in advance and debated publicly, and will not shock the market.
🔴U.S. economy: 1 bright spot and 1 blind spot
Steady growth, moderate consumer spending, and improving production are all in place. Housing remains the weakest link.
The biggest bright spot: Business investment. Equipment is +8% Y/Y, with high-tech nearly +25%, led by data centers and AI.
Warsh: "What people are calling 'AI investment' will soon just be called 'investment'."
🔴Labor: Stable to the point of boredom. Strong productivity, low unemployment, and virtually unchanged over the past year—few layoffs and good wage growth.
Warsh will not carry on Powell’s legacy, instead reversing 17 years of the Fed "intervening in everything."
For crypto, the Fed’s refusal to inject liquidity and leaving open the possibility of a hike (nearly half of the FOMC has voted to raise rates at least once this year) is a harsh environment for short-term risk assets. But if the Fed truly shrinks its footprint, the bond market will have to reprice the risk of U.S. fiscal policy on its own—and BTC’s long-term story will gain more fuel.