The US central bank says it continues to watch economic developments closely.
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The US Central Bank (Fed) reiterated that the consequences on the Chinese economy of the epidemic of new coronavirus would penalize the world economy, and indicated that it continued to look closely at the evolutions of the conjuncture, according to a report released Friday.
“The recent emergence of the coronavirus (…) could lead to ruptures (in the economy) in China which will have repercussions on the whole of the world economy”, indicated the Fed in its semi-annual report monetary policy.
Without advancing on what the members of its monetary committee will decide at their next meeting, the Fed nevertheless stressed that “in a context of weak economic activity and dormant inflationary pressures, foreign central banks generally adopt a policy more accommodating ”, that is to say lower rates.
President Donald Trump regularly criticizes the Federal Reserve, urging it to cut rates.
At its last monetary meeting, on January 28 and 29, the Fed had left them unchanged.
President Jerome Powell then worried about the economic consequences of this epidemic, but said it was “too early to say what the effects will be.”
The epidemic infected 31,161 people in mainland China, 636 of whom died, according to a latest official report.
In the rest of the world, 240 cases of contamination have been confirmed in around 30 countries and territories, including two fatal, in Hong Kong and the Philippines.
Industrial production down
On the other hand, the Fed does not seem worried about the decline in American manufacturing production, by 1.3% in 2019. For the Central Bank, this contraction is more the low level of a classic economic cycle, than a sign before -current of a recession.
“Most periods of economic growth include periods of modest growth below trend,” she said.
“It is important to note that this weakness has had an impact on other sectors,” said the Fed, however, citing for example the fact that “goods that are manufactured need to be transported.”
The Fed explains the decline in industrial production by “multiple factors, including trade (conflicts), weak global growth, less business investment, falling oil prices (…) and the slowdown in the production of Boeing 737 Max, “which no longer flies after two fatal accidents.
The industrial sector was one of the victims of the trade war that China and the United States waged for almost two years. A truce was signed on January 15, and China has pledged to buy large quantities of American goods.
This monetary policy report is released to accompany the semi-annual hearing of Fed President Jerome Powell scheduled for Tuesday and Wednesday before Senate and House committees.
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