© Reuters. FILE PHOTO: Federal Reserve Chairman Jerome Powell testifies during a US House Subcommittee on Oversight and Reform hearing on the coronavirus crisis, on Capitol Hill in Washington, US, on June 22, 2021. Graeme Jennings/Pool via REUTERS / File Photo
(Reuters) – Federal Reserve Chairman Jerome Powell said on Wednesday that he expects the US dollar to remain the world’s reserve currency as long as democratic institutions and the rule of law remain in the United States.
“The status of the dollar as the world’s reserve currency is very important to us,” Powell told the House Financial Services Committee. “I think the reason we have this status is largely due to our great democratic institutions, the rule of law, and the fact that we, in general, have strong levels of price stability.”
“I think the dollar will remain the reserve currency as long as these things are in place,” he said.
The dollar’s share of official foreign exchange reserves fell to a 20-year low of 58% in the fourth quarter of 2022, according to IMF data.
When lawmakers revisited the issue later in the session, Powell said history shows that the global reserve currency situation is “not a permanent situation, but a permanent situation.”
He said that no other country combines such features as the rule of law, price stability, strong democratic institutions and open capital accounts.
“I think in the case of the United States, as long as we maintain these characteristics of our government and our country, we can continue to be the world’s reserve currency,” he said.