Fed publishes Monetary Policy Report: Possible effects from coronavirus outbreak pose risk

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In its Monetary Policy Report presented to Congress, the Federal Reserve (Fed) stated that the possible effects of the new type of coronavirus outbreak in China pose a risk for the economic outlook.

The February issue of the semi-annual Monetary Policy Report prepared by the Fed twice a year for the US Congress has been published.

Fed President Jerome Powell will present at the Congress next week, stating that the US economy continued its moderate growth last year and the labor market in the country has become stronger.

Inflation remained below target

In the report, which emphasized that the growth in the economy has entered the 11th year, inflation is below 2 percent, which is the long-term target of the Federal Open Market Committee (FOMC).

In the report, which was reminded that FOMC reduced the interest rate to 1.50-1.75 percent in the July, September and October meetings last year in line with the effects of global developments and “silent” inflation pressures, the economic stance of the dominant position of the monetary policy in the next meetings of the committee was It was stated that it was decided to support the power market and inflation target.

The risk of ‘coronavirus’ in an economic outlook

It was recalled that the unemployment rate, which was 3.9 in 2018 in the country, fell to 3.5 percent last year, while the rate of participation in the workforce has increased and the wage increase has remained behind the pace observed in previous years, although it has followed a moderate course.

In the report, which pointed out that inflation was 1.6 percent last year, it was noted that long-term inflation expectations have followed a stable trend since the middle of last year.

The report emphasized that the gross domestic product showed a moderate increase in the second half of 2019, and said the following:

“Consumer spending increased on average at a moderate pace, and housing investments rose in the first half of 2019 after the decline in 2018. In contrast, business fixed investments fell in the second half of last year, driven by factors such as uncertainty in trade policy and weak global growth. The downward risks to the US economy seem to decrease during the rest of the year, with some decline, economic growth signaling stability and financial conditions improving. Possible effects from the coronavirus outbreak in China soon pose a new risk for the economic outlook. “

Financial and international developments

In the report, which pointed out that the financial conditions in the country continue to support economic activities with the expenditures of businesses and households, the US financial system was reported to be much more resistant than the period before the financial crisis.

In the report evaluating international developments as well as the US economy, it was stated that the growth in Asian economies, especially Hong Kong and India, slowed down, and many Latin American economies continued to perform lower than expected.

In the report, “In some developed economies, the economic activities have slowed down. However, the latest indicators are showing a temporary stability signal. The global slowdown in the manufacturing sector and trade seems to be coming to an end, and consumer spending and service activities remain strong throughout the world.” assessment was made.

In the report, which is stated that the data coming from the beginning of this year shows that the growth is stable, in the economically important regions such as China and Euro zone, it was stated that the new type of coronavirus epidemic may cause difficulties in the Chinese economy and its effects may spread to the global economy.

The report noted that foreign financial markets recovered in the second half of last year, with favorable political developments, such as concerted actions of central banks, the development of the U.S.-China trade agreement and the reduced risk of Brexit uncertainty.



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