Mon. Feb 24th, 2020

The Federal Reserve closely monitors the coronavirus and warns that it will have effects on the US economy.




The United States Federal Reserve (Fed) «Is monitoring closely» the evolution of the coronavirus epidemic and the risks that its contagion can represent from China to the rest of the global economy, as admitted by the president of the US central bank, Jerome Powell in his appearance before the Financial Services Committee of the House of Representatives.

The head of the US central bank has pointed out that «We are closely monitoring the appearance of the coronavirus, which could lead to disruptions in China that would extend to the rest of the global economy. ”

In its biennial report on the US economy, the Fed already warned last week that the viral outbreak has replaced other risks to the economy that have blurred in recent months, such as trade tensions or the slowdown in the growth of the economy at a global level. In this regard, in response to congressmen, Powell has pointed out that the epidemic will have an impact on China and its neighbors and main trading partners and it remains to be known what effect it will have on the US economy.

“We know that will have some effect on the US, but we must resist the temptation to speculate about it and see if these effects are lasting, ”said the president of the Fed, for whom the coronavirus crisis will have a“ provisional ”impact. Likewise, the president of the Fed has expressed his confidence that the People’s Bank of China will adopt measures in support of the Chinese economy. «I hope that the Chinese authorities will take measures to cushion the impact (of the coronavirus)», has indicated.

On the other hand, Jerome Powell has reiterated that in the current situation, in which global economic growth seems to have stabilized, The Fed’s monetary policy seems to be at an adequate level. However, the central banker has warned that, given the current low level of interest rates, «It would be important that fiscal policy supports the economy» in case of a weakening of growth, so it has indicated the need to clean up public accounts so that the federal budget has the margin to assist the economy when necessary.

Deficit at least until 2035

«Put the federal budget in a sustainable path when the economy is strong it would help ensure the necessary margin for fiscal policy to help stabilize the economy during a recession, ”Powell said, adding that healthier accounts could also support long-term economic growth.

Powell’s words before Congress arrive less than 24 hours after US President Donald Trump, one of the biggest critics of Powell’s work at the head of the Fed, appeared yesterday a budget plan for the US which does not foresee eliminating the deficit at least until 2035.

Specifically, Washington has estimated that for fiscal year 2021, which begins on October 1, the country will register a budget deficit of 966,000 million dollars (884,980 million euros), equivalent to 4.1% of GDP, eight tenths less. Between 2021 and 2030, the accumulated deficit of the US Administration will be 5.6 trillion dollars (5.13 million euros).

The budget plan presented, which will presumably be rejected because the Democratic Party has a majority in the House of Representatives, has estimated that for the next fiscal year, the public coffers of the United States record revenues of 3.8 billion dollars and expenses of 4.8 billion dollars (3.48 and 4.39 billion euros, respectively).

Between 2021 and 2030, the Trump Executive expects the country’s GDP growth to be around 3%. On his side, he has also predicted that unemployment remains at 3.6% during the next year (minimum for 50 years), although until 2030 it will end up rebounding to stand at 4%.

With respect to public debt, the US Government has calculated that it will continue to rise in the next ten years, until it reaches 23.9 billion dollars (21.9 million euros) in 2030, feels billions more than the debt recorded in the fiscal year ended September of 2019.

Despite the continuous increases in public debt, its weight with respect to GDP will be reduced by the growth of the economy. Thus, while in 2021 it will be 81% of GDP, in 2030 it will end up falling to 66%


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