In the Semiannual Monetary Policy Report to the Congress, Fed Chair Jerome Powell warned that while “some of the uncertainties around trade have diminished recently, but risks to the outlook remain. In particular, Fed is ” closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy.”
But for now, he said, the “current stance of monetary policy will likely remain appropriate”, if incoming information about the economic remains broadly consistent with FOMC’s outlook. He also reiterated that ” If developments emerge that cause a material reassessment of our outlook, we would respond accordingly.”
Powell also pointed out that the current low interest rate environment means “it would be important for fiscal policy to help support the economy if it weakens”. He added, “Putting the federal budget on a sustainable path when the economy is strong would help ensure that policymakers have the space to use fiscal policy to assist in stabilizing the economy during a downturn. A more sustainable federal budget could also support the economy’s growth over the long term.”
