February 5, 2020 / 8:23 PM / 11 days ago

Fed's Daly: I don't think coronavirus will have material impact on U.S. economy

San Francisco Federal Reserve Bank President Mary Daly poses at the bank’s headquarters in San Francisco, California, U.S., July 16, 2019. REUTERS/Ann Saphir.

WASHINGTON (Reuters) - The escalating coronavirus outbreak is unlikely to significantly impact the U.S. economy, San Francisco Federal Reserve Bank President Mary Daly on Wednesday.

“It bears further watching and of course we are keeping a close eye, but right now I am not looking for this to do anything material to our economy,” Daly said in a television interview with CNBC, echoing similar comments made last week by two top central bank officials.

“So I expect China to have a couple of quarters perhaps of weaker growth but then bounce back once this has been resolved and then that to have a temporary impact on the US economy and go away once things have been resolved”, Daly said.

The flu-like virus has killed nearly 500 people in mainland China, spread to several other countries and caused the world’s second largest economy to be hit by travel curbs and business shut-downs. Nearly $700 billion was wiped off mainland Chinese stocks on Monday with many factories shut and cities cut off, fuelling worries about global supply chains.

The U.S. Federal Reserve cut interest rates three times last year but has said it intends to hold steady in 2020, barring a major change in the U.S. economic outlook.

It kept interest rates unchanged last week at its first monetary policy meeting of the year but already investors are increasingly betting the central bank will be forced to cut interest rates this year due to the economic impact of the coronavirus outbreak, which has the potential to hurt global growth if it persists.

Daly said U.S. monetary policy is in a “really good position” and noted the interest rate cuts the Fed carried out last year along with a reduction in U.S.-China trade tensions and the avoidance of a hard Brexit are helping offset other uncertainties such as the coronavirus.

“Now the way I see it is the cuts we have in place already, the accommodation, puts the U.S. economy in a good place to weather these storms,” Daly said.

She added that business contacts she regularly speaks to are beginning to put in place plans they had shelved last year and are optimistic about the economy for 2020.

Reporting by Lindsay Dunsmuir; Additional reporting by Kanishka Singh in Bangalore; Editing by Chizu Nomiyama

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