The Federal Reserve is studying whether the coronavirus will change its assessment of the US economy, but such a conclusion would be premature at this stage, Chairman Jerome Powell said on Tuesday
WASHINGTON (Pakistan Point News / Sputnik - 11th February, 2020) The Federal Reserve is studying whether the coronavirus will change its assessment of the US economy, but such a conclusion would be premature at this stage, Chairman Jerome Powell said on Tuesday.
"Of course, first we observe the human tragedy which is terrible to watch, but for us, really, the question is what will be the effects on the US economy," Powell said, delivering his semiannual testimony and monetary policy report to the US Congress. "Will it be persistent? Will they be material? That's really the question. I think it's just too early to say."
The coronavirus has killed more than 1,000 people and infected over 42,000 in China, crippling whole cities and industries in the world's second-largest economy. The disease has spread to more than 25 countries, and in the United States, some 13 people have been infected so far.
In his opening speech to lawmakers, Powell said the Federal Reserve was closely monitoring the emergence of the pandemic and its impact on China and the world, despite the resilience of the American economy and jobs sector. "Some of the uncertainties around trade have diminished recently, but risks to the outlook remain," he said.
Responding to a question, Powell said it could be assumed that the US economy will be subjected to some impact from the pandemic.
"I think we know there will be effects on China ... and China's close neighbors and major trading partners in Europe, as well as Asia, and we know that there will be some, very likely be some, effects on the United States," Powell said. "We have to resist the temptation to speculate on this and so we'll be watching that carefully again, and the question we'll be asking is 'will these be persistent effects that could lead to a material assessment."
US investment bank Goldman Sachs has estimated that China's economy will suffer a 1.6 percent-point reduction to first-quarter growth owing to the coronavirus crisis. It also expects the impact on China to reduce US output by 0.4 percentage point to 0.5 percentage point, at an annual rate, in the first quarter, with growth rebounding in the second quarter, leaving minimal impact on full-year growth.
