It’s too soon to judge the potential impact of the coronavirus outbreak on the U.S. economy or consider a monetary policy response, Chicago Fed President Charles Evans said.
“I think it would be premature, until we have more data and have an idea of what the forecast is, to think about monetary policy action,” Evans told reporters Thursday after an event in Mexico City. “But we’re monitoring it very closely, and if we see something that does require adjustment, I’m confident we’ll give that all the consideration it needs.”
The U.S. stock market continued to tumble Thursday, extending declines for a sixth session, amid worries about the economic impact of the spreading coronavirus outbreak. The S&P 500 has dropped almost 9% since Feb. 19. The yield on 10-year Treasury securities fell as low as 1.24%, a new record, though it had pushed back to 1.31% at 1:10 p.m. in New York.
Investors are rushing into bets that Federal Reserve officials will be forced to cut interest rates when they next gather in Washington for their March 17-18 meeting. Chances of quarter-point reductions at each of their next three meetings — in March, April and June — are now seen to be about 50%, according to futures contracts linked to their benchmark federal funds rate.
Evans told reporters the Fed has the capacity to respond if necessary, adding that it would take a few months to have an idea of what the appropriate response would be.
“If circumstances required some additional accommodation, we have that capacity. The first way I’m going to think about this is whether or not lending behavior is adversely influenced,” Evans said. “After several months, and having a better idea of how this is going to transpire through this year, I think we will be better positioned to think about what the implications might be for monetary policy.”
