Federal Reserve Chairman Jerome Powell sought to reassure markets that the central bank would protect the economy from fears over the coronavirus outbreak, signaling that it would cut interest rates if needed.
“The fundamentals of the U.S. economy remain strong,” Powell said in an unscheduled statement Friday. “However, the coronavirus poses evolving risks to economic activity.”
“The Federal Reserve is closely monitoring developments and their implications for the economic outlook,” he said. “We will use our tools and act as appropriate to support the economy.”
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Powell issued the statement following major losses in stock markets. The Dow Jones Industrial Average was down nearly 3% on the day and had declined by more than a tenth on the week.
Even before Powell signaled that the central bank would lower rates if needed, investors expected that the market turmoil would force the Fed to ease monetary policy. Bond market prices indicated Friday afternoon that investors expected a half-percentage-point cut in the Fed’s interest rate target at the monetary policy committee’s next meeting on March 17.
President Trump has sought to play down economic concerns related to the coronavirus outbreak, blaming the week’s market losses on investor fears that a Democrat will win the presidency. Nevertheless, he’s also leaned on the Fed to ease money.
“And we’ve been hurt by — we’ve been hurt, in my opinion, very badly, by our own Federal Reserve,” Trump said on Wednesday during a press conference about the coronavirus, in which he indicated he favors rate cuts.
Yet some within the Fed may advocate against easier money. Federal Reserve Bank of St. Louis President James Bullard on Friday said that further interest rate cuts were possible if the outbreak became a “pandemic” but also indicated that he was not expecting that scenario.
