Federal Reserve Chair to Congress: No Rescue for Crypto Markets; Controlling Inflation Remains Our Top Priority

Kevin Warsh, the Chair of the Federal Reserve, delivered a clear message to the markets during his first semiannual monetary policy report to Congress: the U.S. central bank does not intend to back down in the face of inflation and has no plans to rescue any part of the market, including the cryptocurrency industry.

According to Mihan Blockchain, Warsh's remarks come as investors carefully assess the future path of U.S. interest rates. On one hand, new data shows that inflationary pressures have eased compared to previous months, while on the other hand, the Federal Reserve continues to emphasize the need to maintain contractionary policies to bring inflation back to the 2% target.

Warsh: We Have No Tolerance for High Inflation

In his opening remarks before the House Financial Services Committee, the Federal Reserve Chair emphasized that combating inflation remains the central bank's most important priority.

He stated:

If we do the policymaking correctly — and I assure you we will — the inflation wave of the past five years will become part of history.

Warsh also stressed:

We have no tolerance for persistent inflation above our target, and we are fully committed to achieving a 2% inflation rate.

This stance comes as the latest Consumer Price Index (CPI) report indicates that the inflation rate for June has reached 3.5%, a decrease of 0.4% from the previous month. Experts have cited the drop in fuel prices as one of the key factors behind the reduction in inflationary pressures last month.

However, the Federal Reserve Chair emphasized that the recent decline in inflation does not signify the end of the journey, and the central bank will continue to closely monitor economic conditions.

Although Warsh did not directly address the decision for the next Federal Reserve meeting, his tone suggested that the market should not expect a rapid reduction in interest rates.

He explained that the Federal Reserve's decision to keep interest rates steady at the June meeting was part of a broader strategy to control inflation.

Christopher Waller, a member of the Federal Reserve Board, also warned yesterday that if inflationary pressures intensify again, there is a possibility of another interest rate hike.

Federal Reserve Chair: We Have No Intention to Rescue Anyone, Not Even the Crypto Market

One of the most significant moments of the session occurred when Warsh was questioned about the Federal Reserve's role in financial crises and the possibility of supporting various sectors of the economy.

In response, he said:

We want to be in a position where we are not forced to rescue anyone, including the cryptocurrency market.

Warsh also emphasized:

We do not want to be in the business of rescuing others.

These remarks could hold special significance for crypto market participants, as they indicate that unlike some past financial crises, the Federal Reserve is unwilling to play the role of a savior in the event of widespread problems in the digital asset market.

High Mortgage Rates; Inflation is the Main Culprit

In another part of his remarks, Warsh addressed the state of the U.S. housing market, which remains one of the weakest points in the country's economy.

He stated that high mortgage rates are largely a result of inflation, which is still above the Federal Reserve's target.

According to him:

Controlling inflation can be accompanied by a decrease in long-term Treasury yields and, consequently, cheaper mortgage loans.

These comments indicate that the Federal Reserve still views inflation as the primary cause of problems in the housing market and has conditioned a sustainable reduction in interest rates on the return of inflation to targeted levels.

The Hormuz Strait Crisis and the Risk of Inflation Resurgence

Warsh's remarks before Congress come amid rising concerns about the energy market. Following renewed tensions between the U.S. and Iran, Trump announced the government's renewed plan to impose restrictions in the Hormuz Strait and charge a 20% fee on passing shipments; news that pushed Brent oil prices up nearly 10%.

Rising energy prices are one of the most significant factors that could halt the downward trend of inflation and reintroduce price pressures into the U.S. economy; a topic that is likely to play a crucial role in the Federal Reserve's future decisions.

Artificial Intelligence; The Most Important Story in the U.S. Economy

In another part of his speech, the Federal Reserve Chair referred to extensive investments in artificial intelligence, deeming it the most significant economic transformation currently taking place in the U.S.

He stated:

Investment in artificial intelligence is the most prominent feature of today's American economy.

However, Warsh emphasized that it is still unclear how much this technology can enhance productivity and economic growth in the long term.

He also added that the Federal Reserve does not fear economic growth stemming from increased productivity and does not view such growth as a threat to the economy.

Response to Trump's Political Pressures

Another topic of interest for congressional representatives was the Federal Reserve's relationship with the Trump administration.

When Warsh was asked what he would do if the President attempted to interfere in the central bank's decisions, he replied:

I will continue to do my job.

Many analysts have interpreted this response as a sign of the new Federal Reserve Chair's efforts to maintain the central bank's independence against political pressures.

Why Do Markets Care About Warsh's Remarks?

Unlike previous Federal Reserve Chairs, Warsh has shown little inclination to provide explicit guidance on the future path of interest rates since taking office.

He has even set aside participation in the famous "dot plot" of the Federal Reserve and has repeatedly stated that he is not interested in providing early signals to the markets.

For this reason, investors are trying to extract clues about the future of U.S. monetary policy from the tone of his remarks; a policy that remains the most influential factor affecting stock, bond, and cryptocurrency markets.