THURSDAY, March 28, 2024
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Evans says premature to consider Fed action on virus scare

Evans says premature to consider Fed action on virus scare

It may take several months to judge the impact of the coronavirus outbreak on the U.S. economy, said Federal Reserve Bank of Chicago President Charles Evans, though policymakers are watching the situation carefully.

"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 coronavirus outbreak. The S&P 500 has dropped around 10% since Feb. 19. The yield on 10-year Treasury securities briefly fell to a new record low of 1.24%.

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 above 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."

Fed No. 2 Richard Clarida said on Tuesday that it was "still too soon to even speculate" about the size or persistence of any effects on the U.S. outlook and that the central bank had monetary policy in a good place.

Evans echoed that sentiment.

"I think that our monetary policy is pretty well positioned for the risks that we have seen coming," he told reporters. "I would say that this was not on my radar screen when we made three rate cuts last year, but I certainly feel better about the positioning of policy with any type of additional risk that we might be facing."

 

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