Washington (AFP) – The US central bank is keeping watch for any impact from the virus outbreak in China that could spread beyond its borders, Federal Reserve Chairman Jerome Powell said Tuesday.
With the death toll now surpassing 1,000, transportation has been cut off and businesses shuttered, which can delay shipments of key parts to foreign manufacturers.
The Fed is “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 to Congress.
In his semi-annual appearance before the House Financial Services Committee to present a report on monetary policy, Powell was fairly upbeat about the US economy, citing solid job gains and continued growth.
However, he cautioned that risks remain.
“We find the US economy in a very good place, performing well,” the Fed chief told legislators, but into that rosy picture comes the virus outbreak.
The situation surely will hit the economy of China along with its near neighbors and trading partners in Asia and Europe, but the question is whether it will have a “material” and “persistent” impact on the US and global economies.
“We know that there will be some, very likely some effects on the United States (but) I think it’s just too early to say,” Powell said, adding “we have to resist the temptation to speculate on this.”
Nicholas R. Lardy, a China scholar at the Peterson Institute for International Economics, said the country could see first quarter growth slow sharply to 4 percent, but “the adverse effect on annual growth will be much smaller.”
But it still creates “a measurable headwind for the global economy,” he said.
– Blaming Powell –
As he was testifying, President Donald Trump launched a new attack on the Fed chairman.
Wall Street advanced early Tuesday, with the benchmark index Dow Jones Industrial Average beating its all-time high before retreating. Trump blamed Powell.
“When Jerome Powell started his testimony today, the Dow was up 125, & heading higher. As he spoke it drifted steadily downward, as usual, and is now at -15,” Trump tweeted.