Some of the forces that held down U.S. economic growth last year have eased, but risks to the outlook remain, particularly from the coronavirus, Federal Reserve Chairman Jerome Powell said Tuesday.
“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 testimony prepared for a House Financial Services Committee hearing later Tuesday.
The Fed’s report to Congress on monetary policy noted fragility in China’s corporate and financial sector that could leave it vulnerable to an adverse shock.
Earlier Tuesday, Tedros Adhanom Ghebreyesus, the director general of the World Health Organization, said coronavirus is “a grave threat for the rest of the world” amid some signs the rate of infection may be slowing.
Although the semi-annual hearing on Fed monetary policy doesn't start until 10 a.m., the House panel decided to release the Fed chairman’s testimony a few hours early.
Worried about the health of the economy, the U.S. central bank cut interest rates by a quarter point at three successive meetings last fall, bringing its benchmark rate down to a range of 1.5%-1.75%.
These fears have eased somewhat. Over the past two policy meetings in December and January, Fed officials have left the key policy rate unchanged.
Powell said the Fed was able to hold policy steady over the past 12 weeks because some uncertainties surrounding trade had diminished recently and there were some signs that global growth “may be stabilizing.”
Fed officials believe the current accommodative stance of policy is appropriate to support growth and push inflation up to the central bank’s 2% target, Powell said.
If incoming data back up this belief, the current stance of monetary policy will remain appropriate, Powell said.
Source : MarketWatch