Nordstrom: The Value of Central Bank Relationships

Introduction

Thank you for the kind invitation. I am delighted to be here with you all this evening to celebrate the Bundesbank New York Representative Office's 40th anniversary-an impressive milestone.

Much has changed in the world of global finance since the Representative Office first opened its doors in 1986. For example, at that time stock exchange floors were loud places crowded with people and paper, Paul Volcker was the Federal Reserve chairman, having helped steer the country out of a period of high inflation, and a single European currency remained just an idea. Since then, staff at the New York Fed and the Bundesbank Representative Office, situated together in the world's largest financial center, have had a front-row seat to countless changes.

While the global financial landscape will undoubtedly continue to change, central banks will continue to navigate and adapt thanks to foundational practices such as cooperation and engagement. The Representative Office, under the leadership of Simon Keller and his predecessors, has been a consistent force in connecting central bank colleagues from the U.S. and Germany. On behalf of my Fed colleagues, I would like to extend our deep appreciation to the Representative Office and the broader central bank representative community for their active engagement and collaboration. I look forward to many future celebrations like this one.

In that same spirit, I would like to take this occasion to offer some brief thoughts on the value of strong central bank relationships, including the vital role of the representative offices, and the need to maintain these ties as markets continue to evolve.

Before I begin, let me give our customary disclaimer that the views I express today are my own and not those of the New York Fed or the Federal Reserve System.¹

Representative Offices: A Bridge Between Central Banks

Representative offices play a critical role in establishing on-the-ground perspectives for central banks in financial centers, including New York. Having a physical presence provides unparalleled insights into local financial markets and economic developments. It also fosters strong in-person engagement, helping broaden networks and deepen relationships between central banks. These offices allow us at the Fed to gain perspectives from central bankers on their home economies, financial markets, and institutional policies and operations. Our regular engagement is critical because the interconnected nature of global financial markets and economies means events in one country could rapidly spill over to impact others. By engaging with the offices, we build trust. Connecting staff across central banks helps share awareness of similar issues and challenges.

For central banks, trust and communication are essential in times of uncertainty and when facing common challenges-such as during the pandemic, when many institutions were developing novel emergency facilities and performing market operations while employees worked remotely for the first time. These periods also reveal a common bond among central banks: our dedication to our constituents and mission, regardless of geography or structure.

A Community of Practice

More broadly, strong central bank relationships promote knowledge-sharing and best practices via technical assistance programs, seminars, and conferences. On this point specifically, I would like to commend the work of the Deutsche Bundesbank's Center for International Central Bank Dialogue, which actively works to bring central bankers from across the globe together for trainings and exchanges. Similarly, the New York Fed will host its 50th Central Banking Seminar this September.

Through my years of working at various central banks, including the Riksbank, the ECB, and now the Fed, the value of understanding different market structures, policy preferences and considerations, and histories has always stood out to me. Venues such as the Bank for International Settlements bring together policymakers and staff to compare notes, sharpen their thinking, and understand the different factors central banks consider as they set policy. I've found that regular engagement allows central banks to fine-tune their individual approaches, so that we can learn from one another's experiences to better meet the needs of our constituencies.

Looking Forward

Let me end by saying that central bank engagement will continue to be critical as markets and the global economy evolve. Central banks today are confronting an increasingly complex environment shaped by repeated supply shocks, geopolitical uncertainty, and rapid advances in artificial intelligence and payments technologies. To stay on top of these developments, central bankers must remain in a constant state of learning and listening, hearing from voices across disciplines, functions, and institutions.

Thank you for inviting me and my Federal Reserve colleagues to celebrate your 40-year anniversary. I cannot begin to predict what the next four decades will bring, but I do hope they will be marked by continued active and thoughtful engagement between our institutions, and I am confident that the Representative Office will continue to be a leader and strong partner.

¹ I would like to thank Arif Lokhandwala for his assistance in preparing these remarks and others at the New York Fed for their helpful suggestions.