Fed’s Mester says economic outlook intact though virus a risk

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Federal Reserve Bank of Cleveland President Loretta Mester said the impact of the coronavirus and the risk it poses to the global economy haven’t changed her forecast for continued growth of about 2% in the U.S. this year.

Federal Reserve Bank of Cleveland President Loretta Mester

“Right now I’m thinking about that as a risk,” Mester said Friday in an interview on Bloomberg Television, referring to the virus that has killed more than 1,300 people, mostly in China.

“There could be spillover to the U.S. economy” in the first quarter, she said. “But in general I’m seeing that as a risk to my forecast. I haven’t marked down my forecast because of it.”

Fed Chairman Jerome Powell told lawmakers on Tuesday the Fed is closely monitoring the situation. But officials so far have not given any indication they believe the outbreak and its impact on global commerce will force them to lower interest rates again after cutting three times in 2019.

Financial markets aren’t convinced. Pricing in fed funds futures contracts show investors expect the Fed to cut rates later this year.

Bloomberg News
Monetary policy Loretta Mester Federal Reserve Bank of Cleveland Federal Reserve FOMC