WASHINGTON — The Federal Reserve kept its key interest rate unchanged at a low level Wednesday amid an economy that looks solid but faces potential global threats, including from China’s viral outbreak.
The Fed sketched a mostly bright picture of the U.S. economy in a statement it released after its latest policy meeting. Yet it also cautioned that it would monitor the world economy, which could be slowed by China’s coronavirus — a risk that Chairman Jerome Powell mentioned at the start of a news conference. Stock and bond markets have gyrated in the past week over fears about the virus.
The central bank said it would hold short-term rates in a range of 1.5 percent to 1.75 percent, far below levels that were typical during previous expansions. Powell and other Fed officials have indicated that they see that range as low enough to support faster growth and hiring.
Stock prices slipped after the Fed issued its statement and Powell began his news conference 30 minutes later. The Dow Jones Industrial Average closed barely higher after having posted stronger gains in earlier trading. Bond yields declined slightly.
The Fed’s statement, which its policymaking committee approved 10-0, was nearly identical to the one it issued in December, though this time it described consumer spending as rising at only a “moderate” rather than at a “strong” pace. That change likely reflects relatively modest spending by Americans over the holiday shopping season.
Last year, the Fed cut its benchmark rate three times after having raised it four times in 2018. Powell and other Fed officials credit those rate cuts with revitalizing the housing market, which had stumbled early last year, and offsetting some of the drag from President Donald Trump’s trade war with China.
But China’s viral outbreak has injected fresh doubts into that outlook. The coronavirus has in effect shut down much of that nation and seems sure to slow the Chinese economy — the world’s second-largest — which had already been decelerating.
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January 30, 2020 at 06:13AM
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