The Federal Reserve is monitoring the spread of the coronavirus in China and its potential impact on the global and U.S. economies, Federal Reserve Chairman Jerome Powell told the House Financial Services Committee on Tuesday.
Mr. Powell said the overall U.S. economy is in a good place, as economic activity increased at a moderate pace and the labor market strengthened further in 2019. But while uncertainties about trade recently have diminished, risks to the outlook remain, he added.
"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," Mr. Powell said.
Rep. Patrick McHenry, R-N.C., the committee's ranking member, asked Mr. Powell how he's assessing the coronavirus' impact on the Chinese economy and the potential "spillover effect" to other economies.
After speaking about the human tragedy of the coronavirus, Mr. Powell said the question for which there's no answer at the moment is will the virus' effect on the U.S. economy be persistent or short-lived?
"I think we know there will be effects on China through some part of the first half of the year and China's close neighbors and trading partners in Europe as well as Asia," Mr. Powell said. "And we know that there will be very likely be some effects on the United States, I think it's just too early to say (what). We have to resist the temptation to speculate on this."
On the subject on monetary policy, Mr. Powell said that the Federal Open Markets Committee believes its current stance will support continued economic growth, a strong labor market and inflation returning to its 2% objective
The committee lowered the federal funds target range at its July, September and October meetings, bringing the current target range to 1.5% to 1.75%, but has kept it unchanged since October.
"Of course, policy is not on a preset course," Mr. Powell said. "If developments emerge that cause a material reassessment of our outlook, we would respond accordingly."
Mr. Powell was also asked about myriad other topics during the three-hour hearing, including banking regulation, the upcoming shift from LIBOR and Facebook Inc.'s plans to launch a cryptocurrency, Libra.
He will testify Wednesday before the Senate Banking Committee and is expected to deliver a similar message. The FOMC's next meeting is March 17-18.
