#PowellRemarks

New Era for the Global Economy.

The IF division was created on July 1, 1950, but the idea began to take shape a few years earlier. The United States emerged from World War II as a global economic superpower. The Bretton Woods Agreement placed the United States and the Federal Reserve in a central position in the global economy. Our mission then, as it is now, was to serve the American people. But at that time it became clear that the Federal Reserve needed a better understanding of global events to achieve our dual mandate goals.

A 1948 memorandum proposing the creation of this division stated: "The problems of the international economy and finance have become increasingly large, complex, and important in recent years, and our foreign economic relations will undoubtedly continue to give rise to first-order problems." That is the rare economic forecast that turned out to be accurate!

Seventy-five years later, it remains crucial for the Federal Reserve to understand the policies and practices of other governments and central banks, and their implications for the U.S. economy and financial markets. Exchange rate policy, of course, is now firmly in the hands of the U.S. Treasury. However, the end of the Bretton Woods era in the 1970s fundamentally changed the management of monetary policy, as policymakers had to understand the effects of potentially more volatile fluctuations of the U.S. dollar on American families and businesses.

Understanding global trade and capital movements has become increasingly important since 1950, as we saw during the pandemic. The IF division contributes to the generation of data on international capital flows and has dedicated decades to researching the effects of these flows and international trade on both U.S. and foreign economies.