Powell attends the Federal Reserve's International Finance Division event: commemorates Fischer, reiterates the importance of global economic research, does not discuss policy outlook

Federal Reserve Chairman Jerome Powell delivered a speech on Monday at the 75th anniversary event of the Federal Reserve's Division of International Finance (IF), reflecting on the department's historical contributions to global economic research and praising its role in responding to financial crises and the pandemic. However, with the market highly focused on the direction of the Fed's interest rate policy, Powell did not express any views on the current U.S. economic situation or future interest rate outlook during this speech.

In his remarks, Powell mourned the passing of former Federal Reserve Vice Chairman Stanley Fischer, calling him a "giant in the field of international economics." He also highly praised the analytical support provided by the Division of International Finance in various policy formulations, including global capital flows, international risk transmission models, and dollar liquidity arrangements during crises.

He pointed out that the IF team played a key role during the Latin American debt crisis, the 2008 financial crisis, and the COVID-19 pandemic, helping the Federal Reserve make judgments on monetary policy and financial stability by developing complex models and uncertainty indices.

"Past chairs and governors of the Federal Reserve have greatly benefited from the work of this team."

However, in the context of the current complex economic situation and the keen attention on the Fed's policy path, the market had expected Powell to potentially release new policy signals on this occasion. But the entire speech focused on historical review and gratitude, without addressing inflation trends, the labor market, or interest rate direction, nor did it mention the policy considerations from the June Federal Open Market Committee (FOMC) meeting.

Currently, the Federal Reserve is in a "wait-and-see" period, awaiting more inflation and growth data to decide whether to cut interest rates in the second half of the year. Some analysts suggest that Powell's "silence" may be to avoid prematurely influencing market expectations ahead of key data releases.

This speech is also one of Powell's few public appearances in recent weeks, with the next policy statement expected to be made at a press conference following the June meeting.

Here is the full text of Powell's speech:

First, I want to express my condolences to the family and friends of former Vice Chairman Stanley Fischer. Stan was our colleague at the Federal Reserve and a giant in the field of international economics. He not only achieved the highest professional accomplishments but was also a trusted and very generous mentor and teacher, nurturing generations of the most important economic thinkers, including several global central bank governors, presidential advisors, and countless economists. We will miss him greatly.

I also want to congratulate the Division of International Finance (IF) on its 75th anniversary. Over the past 75 years, you have served the Federal Reserve Board and the American people with outstanding contributions. Many current employees are here today to celebrate, along with several former employees of the IF, including former directors Ted Truman, Karen Johnson, Nathan Sheets, and Steve Kamin. This division has also nurtured many well-known former employees, including current Federal Reserve Chair and Treasury Secretary Janet Yellen; professor, author, chess master, and our keynote speaker today, Ken Rogoff; And the humanitarian and economist Albert Hirschman, who is famous for proposing the Herfindahl–Hirschman Index, has recently become one of the characters in the Netflix series "Transatlantic," just to name a few examples.

During my tenure at the Federal Reserve, the IF Division provided us with invaluable insights into global economic activity, international trade and capital flows, as well as the dynamics of overseas financial markets. This team also played a key role during multiple global financial stress events. Your research and analysis form an important foundation for our monetary policy formulation. I would like to thank all those who have served in this division over the past 75 years. Today, I will briefly introduce how this division was established and review some of its significant achievements over the years, after which we will move into the scheduled speeches and discussions for today.

A New Era of Global Economy

The IF Division was established on July 1, 1950, although the initial concept actually dates back a few years earlier. After World War II, the United States emerged as a global economic superpower. The Bretton Woods Agreement positioned the U.S. and the Federal Reserve at the core of the global economy. At that time, our mission was the same as it is now: to serve the American people. However, it was clear that in order for the Federal Reserve to achieve its dual mandate of employment and price stability, it needed to have a better understanding of the global situation.

In 1948, a memorandum proposing the establishment of this division stated: "In recent years, international economic and financial issues have become increasingly significant, complex, and important, and our economic relations with other countries will undoubtedly continue to raise many first-order important questions." — This is one of the very few economic predictions that has been completely validated by time!

Seventy-five years later, the Federal Reserve still needs to understand the policies of other countries' governments and central banks and their impact on the U.S. economy and financial markets. Exchange rate policy is now the responsibility of the Treasury Department. However, after the collapse of the Bretton Woods system in the 1970s, the way monetary policy is formulated changed dramatically, and policymakers must understand the implications of greater fluctuations in the dollar for American households and businesses.

Since 1950, understanding global trade and capital flows has become increasingly important, a fact that was made even more evident during the pandemic. The IF Division is responsible for producing data on international capital flows and has been continuously researching the impact of these flows and international trade on the U.S. and global economies for decades. To predict the direction of changes in employment and inflation, we must understand this complex and interconnected global network.

Another significant shift in the 1970s was the increasing use of macroeconomic modeling, which profoundly influenced the work of the IF Division. Under the leadership of former director Ralph Bryant, the IF Division developed the first multinational model. This team has remained at the forefront, with many economists present here continuously advancing the complexity of the models over the years, allowing us to better analyze current international risks and issues. These models are very helpful in understanding how international shocks are transmitted, how to assess risks and uncertainties through different scenarios, and analyzing the impact of various shocks on the U.S. and global economies. These research findings are used to write research reports, brief the Board, and are also included in the risk and uncertainty assessment materials received by members of the Federal Open Market Committee (FOMC) before each meeting Preparation for Crisis Response

The International Finance (IF) department has also played an important role in responding to global economic turmoil. A typical example is the Latin American debt crisis of the 1980s. At that time, this department was tasked with analyzing the crisis's impact on the global macroeconomic landscape. The work of the IF team, the International Monetary Fund (IMF), and other institutions led to the establishment of emergency financing mechanisms, helping to avoid more severe financial consequences. As global capital flows intensified, new financial stress events emerged around the world, including crises in Mexico, Asia, and Russia. Since then, international capital flows and spillover effects have become routine subjects of analysis and monitoring for the IF department.

The expertise accumulated through addressing these global challenges played a significant role during the financial crisis and the outbreak of the COVID-19 pandemic. Both events required rapid, extensive, and even unprecedented responses to ensure that American households and businesses could still access credit support. The Federal Reserve was relied upon by the United States and the world to step up during such times. During the 2008 global financial crisis, the global dollar financing market faced pressure, and the IF department collaborated with multiple central banks to promote the establishment of currency swap arrangements, helping to restore stability to the dollar market. During the pandemic, the IF department led the establishment of the FIMA Repo Facility, further expanding the supply of dollar liquidity.

These periods of high financial stress and uncertainty prompted the IF department to develop new tools and analytical products to address ongoing events. For example, the IF team developed new methods to assess the economic impact of various types of uncertainty, including new indices tracking geopolitical, inflationary, trade policy, and overall economic uncertainty. We are still in a period of high uncertainty, and these tools are crucial for understanding the specific impacts of uncertainty shocks.

Conclusion

In conclusion, I would like to say that for 75 years, nine Federal Reserve Chairs and countless Board members have greatly benefited from the opinions and analyses of the IF department—not just during crisis responses. In daily international affairs, the IF team also ensures we are well-prepared, providing detailed materials in advance, and often traveling together. You are one of the most popular and valuable members among the accompanying staff. Our ability to maintain good relationships with international counterparts is also thanks to your efforts.

Thank you to Beth Anne and all the colleagues involved in preparing for today's event. Once again, thank you to all current and former IF department employees; your work has enabled our central bank to have both a global perspective and adaptability, allowing us to better fulfill our dual mission of serving all the American people