Chair Powell’s Key Insights: Highlights from the 75th Anniversary Conference of the Federal Reserve Board’s Division of International Finance

Thank you for gathering here today. I want to start by offering my condolences to the family and friends of former Vice Chair Stanley Fischer. Stan was a respected colleague at the Fed and stood tall in international economics. He wasn’t just brilliant; he was also a generous mentor to many influential economic leaders, including heads of central banks and presidential advisers. He will be missed.

Today, we celebrate the Division of International Finance (IF) and its 75 years of service to the Federal Reserve Board and, by extension, to all Americans. It’s wonderful to see many current staff members and alumni, including past directors like Ted Truman and Janet Yellen. The division has also produced notable figures, like Ken Rogoff and Albert Hirschman, each having made significant contributions to the field.

Over the years, the IF division has provided crucial insights into global economic activities, international trade, and finance. Their research is vital for the monetary policy decisions we make. Today, I’ll highlight its history, accomplishments, and its role in our current economic landscape.

The Birth of a New Economic Era

The IF division started on July 1, 1950, but its roots go back even further. After World War II, the U.S. emerged as a global economic powerhouse. The Bretton Woods Agreement positioned the U.S. and the Fed at the center of the world economy. We realized that to fulfill our mission of serving the American people, we needed deeper insights into global developments.

A 1948 memo that proposed creating this division stated, “Problems of international economics and finance have become increasingly large, complex, and significant.” That prediction has certainly held true!

Seventy-five years later, it’s still essential that we grasp the actions of other governments and central banks and how they affect our economy. While exchange rate policy is now primarily managed by the U.S. Treasury, understanding how the dollar’s fluctuations impact American families and businesses remains crucial.

The COVID-19 pandemic highlighted the importance of understanding global trade and capital movements. The IF division produces essential data on international capital flows and has researched their effects on economies for decades. This knowledge helps us anticipate trends in employment and inflation.

Prepared for Economic Crises

The IF division has been key in navigating global economic challenges. For instance, during the Latin American debt crisis of the 1980s, IF’s analysis helped shape responses that prevented a deeper financial fallout. As global capital flows increased, this expertise proved invaluable during the Global Financial Crisis and the pandemic. In both cases, we needed swift and large-scale actions to keep credit available for households and businesses.

During the Global Financial Crisis, the IF division helped establish swap line arrangements with major central banks, restoring stability in U.S. dollar markets. Similarly, during the pandemic, they expanded dollar liquidity to handle the rapid changes in the economic landscape.

These crises have pushed the division to develop new analytical tools that measure the impact of uncertainty on economic performance. New indexes tracking geopolitical, trade, and economic uncertainties have been created to help us understand their implications. This ongoing work is vital as we face heightened economic volatility.

Looking Ahead

For 75 years, countless Fed chairs and Board members have relied on the expertise of IF staff, not just in crises but in our everyday operations. Their guidance ensures we are prepared for international engagements, offering detailed insights and analysis. We deeply value the relationships IF staff foster with global counterparts.

Thank you again for attending this celebration. A big thanks to the IF staff—both current and former—for your contributions. Together, we strive to be a knowledgeable and responsive central bank, committed to serving all Americans.

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