Fed's Collins: Observations on the Economic Outlook, and Small Business

Fed's Schmid: The labor market is under structural, not cyclical, strain.

Before I begin, let me note that the views I’ll express today are my own and not necessarily those of the Federal Reserve System or my colleagues on the Federal Open Market Committee. When people talk about the safe-haven status of the dollar, they often point to flight-to-quality episodes like the Global Financial Crisis and the early days of the COVID pandemic. For me, a different episode stands out, one from before I became a Federal Reserve policymaker. On the evening of Friday, August 5th, 2011, Standard & Poor’s downgraded the United States’ long-term credit rating to AA+. At the time, I ran a US cash trading desk, and there were lots of questions about how markets would react to the government’s first rating below AAA. Even though stock market indexes fell the following Monday, Treasury prices rallied. Investors were willing to accept lower yields on US government debt rather than higher yields that are often necessary for lower-rated securities. The value of the US dollar declined relative to the Japanese yen and the Swiss franc in the days that followed. But the broad trade-weighted dollar index rose.2 This experience reinforced to me that, in times of financial trouble, investors and governments alike place great trust in the US dollar. In my brief prepared remarks today, I’ll discuss the underpinnings of the dollar’s leading international role, including its safe-haven status, and point to a few potential developments that bear watching. While I don’t see any big shifts in the dollar’s standing on the immediate horizon, the world is constantly changing. We shouldn’t take for granted the conditions that have made the dollar the world’s dominant currency FED’S HAMMACK: EURO STILL NOT READY TO TAKE OVER FOR DOLLAR FED’S HAMMACK: FED POLICY IS IN GOOD POSITION TO NAVIGATE INFLATION, JOB CHALLENGES FED’S HAMMACK: FED RATE POLICY LIKELY ON HOLD FOR QUITE SOME TIME