Federal Reserve Chairman Jerome Powell signaled during a rare midday statement on Friday that policymakers at the U.S. central bank are prepared to cut interest rates if the deadly coronavirus outbreak begins to hurt the economy.
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"The fundamentals of the U.S. economy remain strong," Powell said in the statement. "However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."
The language mirrors a previous statement issued in June by the Fed that paved the way for a 25-basis point interest rate cuts in July after a global slowdown brought on by the U.S.-China trade war threatened to seep into the U.S. The central bank eventually lowered rates three times in 2019, part of Powell called a “mid-cycle adjustment,” to a range between 1.5 percent and 1.75 percent.
Powell's statement comes amid an extended global meltdown that has major U.S. averages on track for their steepest weekly decline since the financial crisis in 2008. Stocks maintained declines after his statement.
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The Dow Jones Industrial Average, in heavy trading, fell over 800 points in the final hour of trading. Earlier in the session, the Dow plunged by as much as 1,085.63 points, or 4.2 percent. Stil, Microsoft and Exxon Mobil were among the stocks investors were dipping into.
Markets have been pressuring the Fed to ease the benchmark federal funds rate. After Powell’s statement, traders were pricing in a 96 percent chance of a 50-basis point cut during the FOMC’s March 17-18 meetings, according to the CME’s FedWatch Tool. Four percent expect policymakers to reduce the interbank lending rate by 25-basis points.
The virus, which causes a disease called COVID-19, has killed close to 3,000 people, with more than 83,000 cases reported worldwide, mostly in China. So far, there have been a total of 60 confirmed cases of coronavirus in the U.S. That figure includes individuals who have been repatriated to the country.
St. Louis Federal Reserve President James Bullard also opened the door to a possible cut on Friday, suggesting that policymakers may take monetary action if the crisis deepens and reaches the level of the ordinary flu.
The coronavirus has not yet been classified as a pandemic by the World Health Organization and has killed far fewer people than the flu, which has already caused an estimated 250,000 hospitalizations and at least 16,000 deaths this season, according to the Centers for Disease Control and Prevention.
“Further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time,” Bullard said.
FOX Business' Jonathan Garber contributed to this report