By Jonnelle Marte
(Reuters) – Risks are rising that the coronavirus outbreak could be more severe than previously thought, but interest rates are now appropriate after the Federal Reserve’s emergency rate cut, St. Louis Federal Reserve President James Bullard said Wednesday.
“We got the policy rate to the right place for now, given the information we have now,” Bullard said in an interview with Bloomberg TV. “And we took out some insurance against the possibility that this will cause a growth slowdown in the U.S.”
Fed officials cut interest rates by half a percentage point Tuesday, bringing the target to a range of 1.00% to 1.25%.
Bullard said he was going to support a rate cut at the March meeting and did not see a reason to wait. The emergency cut moved up the Fed’s action, lessening the need for another move at the March meeting, Bullard said, but policymakers are tracking developments closely.
The Fed official said baseline case for the U.S. economy is still “quite good,” supported by the strongest labor market in 50 years. However, the downside risks have increased because of the virus, he said.
“It will be temporary. Eventually, we’ll get through this,” Bullard said. “But the question is, how severe is it going to be and how long is it going to last?”
Asked about the recent stock market selloff, Bullard said that stocks recently hit a record high and that it’s possible some investors are using the coronavirus as an opportunity to take profits.
(Reporting by Jonnelle Marte; Editing by Chizu Nomiyama)