Following his meeting with Trump, Powell addressed the public today, raising interest rate cut expectations. In the last 24 hours, rumors of Powell’s resignation increased the significance of today’s statements.
Powell’s Statements
As Powell’s speech continued, the prepared text was published on the Fed’s website. The text lacked any mention of resignation or interest rate cuts. Given that it was an event’s opening speech, deviations from the script were unlikely. Regarding the International Finance Division, the Fed Chair highlighted the division’s function, mission, importance, and history.
“The IF division was founded on July 1, 1950, although the idea emerged years earlier. The US emerged from World War II as a global economic superpower. The Bretton Woods Agreement placed the US and the Fed in a central position within the global economy. Our mission then, as it is now, was to serve the American people. It was apparent that Fed required more information on global developments to achieve its dual mission objectives.
A 1948 memo proposing the establishment of this unit stated: ‘International economic and financial issues have become larger, more complex, and significant over recent years, and our foreign economic relations will undoubtedly continue to present major problems.’ This is one of the rare economic forecasts that turned out to be accurate!
Seventy-five years later, understanding other governments’ and central banks’ policies and their impact on the US economy and financial markets remains crucial for the Fed. Foreign exchange policy, of course, is firmly in the hands of the US Treasury now. However, the end of the Bretton Woods era in the 1970s fundamentally altered monetary policy execution, as policymakers needed to understand the potential impacts of more volatile US dollar movements on American families and businesses.”
In conclusion, the resignation rumors were unfounded. Contrary to expectations, Powell’s resignation would have negatively impacted cryptocurrencies. Powell staying until his term ends in 2026 will be more beneficial for cryptocurrencies because it preserves the Fed’s credibility. As for interest rate cuts, if inflation remains stable following tariff concerns, they could start swiftly in the last quarter of this year.
