Story perspectives

Fed Announces $6.7 T Balance-Sheet Cut, Guidance Ends, Crypto Plunges

7/3/2026

Summary

Warsh Announces Cuts

Fed Chair Kevin Warsh announced a $6.7 trillion balance-sheet cut and five task forces at an ECB forum in Sintra, Portugal on July 1, 2026.
He gave no rate forecast for the July 28-29 FOMC meeting, ending forward guidance, and noted inflation at 4.1% YoY PCE and 3.6% above target.
CME FedWatch showed a 66.3% chance of a July hold as crypto markets fell $600 billion to $2.04 trillion, pushing Bitcoin below $59,000.

Summary

Bitcoin Transaction

A possible Bitcoin transaction of up to $1.25 billion could temporarily raise market supply and affect short-term price action.
Morgan Stanley projects the Federal Reserve will keep interest rates unchanged for the rest of the year.
The bank warns that persistent inflation or a stronger labor market could revive talks of further tightening.
Analysts say upcoming employment, consumer-price and spending data will continue shaping Bitcoin’s short-term outlook.

Summary

Lagarde Ends Guidance

Four of the five important central banks said at Sintra that explicit forward guidance ends.
ECB President Christine Lagarde said she regrets being bound by forward guidance, signalling a shift.
Bank of Canada Governor Tiff Macklem confirmed Canada will adopt the stance.
The panel noted AI’s potential productivity gains could be disinflationary.
The Bank of England expects slowdown, while U.S. inflation stays above the Federal Reserve (Fed)’s 2 percent target.

Summary

Warsh Stresses Independence

U.S. President Donald Trump tapped Warsh, the Trump-nominated Fed Chair successor, in March to replace former Fed Chair Jerome Powell.
Warsh stressed the Federal Reserve’s (Fed) independence from politics when asked about rate cuts to aid Trump’s agenda.
He announced that the Fed board will meet in four weeks for a “good family fight” over policy.
Warsh linked recent energy-price declines to the U.S.–Iran framework agreement signed the previous month.

History

Historical Context

After the 2008 credit crunch, the Fed kept rates at zero from December 2008 through December 2015 and used forward guidance to signal prolonged low rates. In 2013 Chair Ben Bernanke made that guidance explicit, pledging near-zero rates while quantitative easing grew the balance sheet. Since 2017 the Fed has pursued quantitative tightening and scaled back forward guidance, prompting reviews by the ECB and Bank of England.

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Warsh Announces Cuts

Fed Chair Kevin Warsh announced a $6.7 trillion balance-sheet cut and five task forces at an ECB forum in Sintra, Portugal on July 1, 2026.
He gave no rate forecast for the July 28-29 FOMC meeting, ending forward guidance, and noted inflation at 4.1% YoY PCE and 3.6% above target.
CME FedWatch showed a 66.3% chance of a July hold as crypto markets fell $600 billion to $2.04 trillion, pushing Bitcoin below $59,000.

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