CBDC and the Future of the Dollar: What Does the Federal Reserve Plan?

How Jerome Powell and the Federal Reserve View the Digital Dollar and CBDC

Jerome Powell, the Chair of the Federal Reserve, recently announced that the creation of a digital dollar is not currently a priority for the Fed. While the institution is monitoring the development of Central Bank Digital Currencies (CBDC), there are no current plans to introduce its own digital currency.

CBDC and Its Role in International Transactions

However, Powell emphasized that the Fed continues to explore CBDC technology due to its potentially significant role in international transactions. He also stated that the United States is far from making a decision to introduce its own digital currency. Speculations suggest that Vice President Kamala Harris might endorse the American CBDC, considering her support for expanding the US Digital Service to expedite crisis relief funds.

Concerns and Speculations Surrounding the Fed’s CBDC Research

Concerns regarding the Fed’s research on CBDC stem from the risk that the United States may want to follow China in the realm of the digital yuan. Politicians, such as Robert F. Kennedy Jr., have voiced these concerns, but Fed representatives dismiss such speculations. It’s worth mentioning that the institution remains non-political, especially in the context of the upcoming elections.

Interest Rate Decisions and the Speech at the Jackson Hole Symposium

During the latest FOMC meeting, it was decided to maintain the target range for the interest rate between 5.25% and 5.5%. However, Jerome Powell hinted at the possibility of a cut during the next meeting on September 18. This reduction is also anticipated by the market and Fed officials themselves.

The Committee noted that the two main goals of monetary policy – stable prices and full employment – still require balance. Powell added that the Fed has a chance for a “historically unusual” return of inflation to the 2% target without significant job losses. A key event will also be the Chair’s speech at the annual Jackson Hole symposium, a significant economic event in the USA.