WASHINGTON -- Federal Reserve Chairman Jerome Powell said the coronavirus "poses evolving risks" to the U.S. economy and signaled the central bank is prepared to cut interest rates if necessary to sustain the country's longest-ever expansion.
The rare statement issued Friday by Powell before the financial markets closed for the U.S. weekend came as stocks posted their seventh-straight daily loss, a slump which earlier prompted a string of Wall Street banks to predict the Fed would start reducing rates at its meeting next month, if not sooner.
Yields on U.S. Treasury securities, one of the world's safest assets, this week fell to record lows as investors turned increasingly concerned that the deadly virus would damage U.S. and global economic growth.
"The fundamentals of the U.S. economy remain strong," Powell said in the four-sentence statement Friday. "However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."
The missive recalls previous instances when the Fed changed course or had to address a budding crisis. When credit markets began to seize up in August 2007, the central bank issued a statement saying it was "prepared to act as needed." Just last June, Powell said the Fed would "act as appropriate" to sustain the expansion.
The Fed cut rates at its meetings in July, September and October, but has since been on hold and indicated it planned to be so long as there was no "material change" to the outlook. The virus may now deliver such a shift in the economy amid mounting concern it's already hurt the Chinese economy and now threatens to damage supply chains, demand, tourism and trade elsewhere.
The S&P 500 pared losses after the statement was remained lower for the day, closing down 0.8% on Friday and 11.5% lower over the week, the largest drop since 2008.
'Squarely on the Table'
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said Powell has put an interest-rate cut "squarely on the table" for when the Federal Open Market Committee meets March 17-18 in Washington.
"This is a step in the right direction to help calm some of the concerns," he said. "This is important in that they're saying they're not going to be stubborn here."