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New coronavirus poses uncertainty to economic outlook, says US Federal Reserve chairman

Washington (AFP) - The deadly virus outbreak in China has put the US Federal Reserve on alert for possible contagion to the domestic and global economies, but held its policy interest rate steady on Wednesday.

Fed Chairman Jerome Powell said that just as the global economy seemed to have stabilized, the coronavirus poses a new risk to growth in China and elsewhere.

The SARS-like outbreak in China has left over 130 people dead and thousands sickened, while airlines have canceled flights and businesses have been shuttered.

That could undermine other major economies if global supply chains that flow from China are disrupted.

"There will clearly be implications at least in the near term for Chinese output and I would guess for some of their close neighbors," Powell told reporters following the Fed's policy meeting.

However, "the situation is really in its early stages and it's very uncertain about how far it will spread and what the macro-economic effects will be," he said. "We are very carefully monitoring the situation."

There remains grounds for "cautious optimism" about the global outlook," Powell said, but "none of this is assured" given continued uncertainties, including the impact of the virus outbreak.

The policy-setting Federal Open Market Committee left the benchmark interest rate steady in the target range of 1.5-1.75 percent, as expected, at the end of its two-day meeting.

Policymakers also signaled that they want to see US inflation push a bit higher, to hit the 2.0 percent Fed target.

After cutting rates three times last year in their effort to buoy the economy amid President Donald Trump's multi-front trade wars, this is the second policy meeting where the central bank has made no move, and it had seemed content to tread water unless there was a "material change" to the outlook.

The statement Wednesday repeated that policymakers will "continue to monitor the implications of incoming inflation for the economic outlook including global developments and muted inflation pressures." Read More

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