Fed Chair Jerome Powell says coronavirus presents ‘evolving risks’ to the U.S. economy
Amid a tumbling stock market and questions about how the White House is handling the coronavirus epidemic, Federal Reserve Chairman Jerome Powell said Friday the virus “poses evolving risks to economic activity.”
“The fundamentals of the U.S. economy remain strong,” Powell said in a statement released Friday afternoon. “However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”
Initial market reaction was muted, with the Dow Jones Industrial Average still chalking up a decline of around 700 points, down from a 1,000-point loss at the opening bell.
Powell’s comments underscore the mixed messaging from President Donald Trump’s administration, with National Economic Council Director Larry Kudlow telling an audience Friday “the virus is not going to sink the American economy.”
What could “sink the economy,” said Kudlow, who was speaking at the Conservative Political Action Conference in Maryland, is “the socialism from our friends on the other side of the aisle.”
Federal Reserve officials unanimously agreed at its last meeting, in January, to make no change to the nation’s benchmark interest rate, defying calls from Trump to lower rates in order to align with other central banks.
Trump has repeatedly lambasted the Fed for not lowering rates far enough, even though it cut rates three times last year. He has continuously singled out Powell, intimated that the Fed Chair should be fired, and promoted negative interest rates, which are traditionally only implemented during a time of severe economic stress.
Markets are currently pricing in a 0.5 percent rate cut at the next Fed meeting, on March 17-18, according to the CME Group’s FedWatch Tool.
While some analysts say a lower rate would calm Wall Street and encourage spending, other economists argue that the Fed’s policy toolbox can only go so far to mitigate the economic fallout.
“It’s hard to fix a real problem with monetary policy,” Bryan Routledge, an associate professor of finance at Carnegie Mellon University, told NBC News. “It’s hard to fix a lack of physical goods with monetary policy. When you have factory workers not going to their jobs, that’s not something you can fix with short-term interest rates.”