Fed's Jerome Powell: Coronavirus poses risk to global economy

Federal Reserve Chairman Jerome Powell on Tuesday said the Wuhan coronavirus poses a risk to global economic growth, adding that there will “very likely be some effects on the United States.”

Powell, appearing before the House Financial Services Committee, cautioned that it was too early to know the full economic impact of the virus, which has left more than 1,000 people dead and infected more than 40,000. But he said it is a new factor clouding the world economic picture, now that trade tensions have subsided.

“Some of the uncertainties around trade have diminished recently, but risks to the outlook remain,” he said. “In particular, we are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.”

He said the Fed‘s biggest questions about the effects of the outbreak are: “Will they be persistent? Will they be material?”

He also acknowledged “the human tragedy, which is terrible to watch.”

Powell emphasized that the central bank does not see a need to adjust interest rates, and he struck an upbeat tone about the U.S. economic expansion, the longest in the country's history, pointing to healthy job gains and rising wages.

“As long as incoming information about the economy remains broadly consistent with this outlook, the current stance of monetary policy will likely remain appropriate,” he said.

Still, he noted that the manufacturing sector weakened over the past year because of trade friction and slow global growth.

In its monetary policy report, released before Powell’s appearance, the Fed said weakness in manufacturing has likely hurt other parts of the economy, but its effect has not been strong enough to cause a recession.

Powell also flagged longer-run issues like “troubling labor market disparities across racial and ethnic groups and across regions of the country.”