U.S. Federal Reserve Chairman Jerome Powell said Tuesday that the current stance of monetary policy will "likely remain appropriate," according to his testimony prepared for a hearing before the House Financial Services Committee later in the day.
"Of course, policy is not on a preset course. If developments emerge that cause a material reassessment of our outlook, we would respond accordingly," Powell said, adding the risks to the U.S. economic outlook remain.
"Some of the uncertainties around trade have diminished recently, but risks to the outlook remain. In particular, we are closely monitoring the emergence of the coronavirus," he said.
Powell's remarks came after the central bank on Friday submitted its semi-annual monetary policy report to Congress. The Fed said in the report that the current stance of monetary policy was appropriate as downside risks to the U.S. economy had receded.
Powell is scheduled to deliver the report and testify before the House Financial Services Committee later Tuesday and before the Senate Banking Committee Wednesday.
The Fed lowered interest rates three times in 2019, cutting the target range of the federal funds rate by 75 basis points to 1.5-1.75 percent. After wrapping up its first monetary policy meeting of 2020 in late January, the Fed left interest rates unchanged and maintained a wait-and-see stance.
Diane Swonk, chief economist at Grant Thornton, a major accounting firm, believed that below-target inflation and cooler-than-desired wage gains are expected to prompt the Fed to cut rates at least once in 2020.
"Downside risks associated with the spillover from the coronavirus may force the Fed to act even more aggressively. The Fed is starting to realize that it has more tools to sustain the expansion than to right the ship once it capsizes," Swonk wrote last week in an analysis.
