Fed chair sees China virus as possible risk to world economy

Just as the outlook for the global economy had been brightening in recent months, a new threat has suddenly emerged in the form of the viral outbreak in China.

That was the cautionary message that Chairman Jerome Powell delivered Wednesday after the Federal Reserve held interest rates low after its latest policy meeting.

Speaking at a news conference, Powell said the signing of a preliminary US-China trade deal earlier this month, the resolution of Brexit and continuing low interest rates in the United States and abroad had suggested that the world economy would start to expand more quickly after being held back by trade conflicts. That scenario is now complicated by the emergence of the virus.

Still, Powell noted that the extent of the economic damage that the virus may ultimately inflict, in China or around the world, remains unknown.

“There is likely to be some disruption to activity in China and globally,” Powell said. “It’s very uncertain how far it will spread and what the (economic) effects will be in China, for its trading partners, and around the world.... We are very carefully monitoring the situation.”

Even so, Powell said he thinks there are “there are signs and reasons to expect” a global economic rebound.

Powell spoke after the Fed had announced that it has kept its key interest rate unchanged in a low range of 1.5% to 1.75%, far below levels that were typical during previous expansions.

The chairman and other Fed officials have indicated that they see that range as low enough to support faster growth and hiring.

Stock prices slipped after the Fed issued its statement and Powell concluded his news conference.

The Dow Jones Industrial Average closed barely higher after having posted stronger gains in earlier trading. Bond yields declined slightly.