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Fed warns of possible shock from coronavirus

Credit: Reuters Studio
Published on February 7, 2020 - Duration: 01:36s

Fed warns of possible shock from coronavirus

The record-long U.S. economic expansion is likely to continue but the coronavirus outbreak poses an unquantifiable risk, the Federal Reserve warned in its latest monetary policy report to Congress.

Conway G.

Gittens has the details.

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Fed warns of possible shock from coronavirus

The Federal Reserve has sounded the alarm on the possible economic fallout from the coronavirus.

In a report released Friday ahead of Fed chairman Jerome Powell's twice-a-year update to Congress next week, the Fed said the recent emergence of the coronavirus could lead to disruptions in China that spill over to the rest of the global economy.

Major U.S. airlines have halted flights to China, consumer brands including

Class="kln">Nike have warned the coronavirus is taking its toll as stores remain shut, and manufacturing supply chains for the likes of

Class="kln">Tesla and

Class="kln">Apple have been disrupted with workers forced to stay home.

Even with the potential fallout, the Fed says the likelihood of a U.S. recession occurring over the next year has dramatically reduced in recent months.

It noted a manufacturing slump caused by an unwillingness for businesses to spend during numerous trade spats between the U.S. and trading partners - wasn't enough to drag the economy into a recession.

And pointed to continued strength in the U.S. job market and consumer spending.

The U.S. economy is in the midst of a record-long economic expansion that began after the financial crisis more than a decade ago.

The Fed cut rates three times last year amid fears the U.S.-China trade war threatened to slam the brakes on that recovery but has since declared it is no rush to move rates up or down.

Efforts by the Federal Reserve to prop up the market for short-term funding for banks are expected to be under scrutiny when Powell heads to Capitol Hill for two days next week.

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