St. Louis Fed President James Bullard warned that “further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza”. However, ” this is not the baseline case at this time.” FOMC is “in a good position in early 2020 as we closely monitor the evolving coronavirus impact on the global economy.”
Bullard said there will be a noticeable impact of China’s Q1 GDP growth due to the coronavirus outbreak. Impact to other countries will be on a smaller scale. He added, “temporary disruptions to global supply chains are likely to have ripple effects across the global economy.”
Meanwhile, “experience with previous viral outbreaks suggests that the effects on U.S. interest rates are tangible and last until the outbreak is clearly contained.”
