Federal Reserve Chairman Jerome Powell said the U.S. central bank is keeping a close eye on fallout from the deadly coronavirus outbreak in China, singling it out among risks threatening the U.S. and world economy.
“In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” Powell said in prepared remarks he’s scheduled to deliver before U.S. lawmakers Tuesday.
Powell stopped short of saying the outbreak had changed the Fed’s baseline outlook for the U.S. economy, or the expectation among many members of the Federal Open Market Committee that rates will remain on hold this year.
“The FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market and inflation returning to the committee’s symmetric 2% objective,” Powell said. “As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate.”
Coronavirus, which has killed more than 1,000 people, has prompted the world’s largest-known quarantine effort and slowed large portions of China’s economy, disrupting travel and commerce worldwide.
Powell is set to appear before the House Financial Services Committee at 10 a.m. in Washington.
The Fed chief will answer questions from lawmakers following his prepared remarks. He’s also scheduled for a hearing before the Senate Banking Committee at 10 a.m. Wednesday as part of his semi-annual testimony to Congress.
Fed officials have dialed up their concern over the coronavirus in public remarks in recent days. Vice Chairman Richard Clarida called it a “wildcard” on Jan. 31. The Fed’s Semiannual Monetary Policy Report, released Feb. 7, said it was a “new risk” that could potentially interfere with trade, depress commodity prices and cause the U.S. dollar to appreciate.
Some private-sector economists have been less cautious, marking down their estimates for first-quarter growth in the U.S., while investors are betting the Fed will respond with an interest rate cut later this year.
Labor Market