The rare statement issued Friday by Powell before the financial markets closed for the US weekend came as stocks posted their seventh-straight daily loss, a slump which earlier prompted a string of Wall Street banks to predict the Fed would start reducing rates at its meeting next month, if not sooner.
The Federal Open Market Committee cut rates three times a year ago, which puts the Fed in a good position to insure against adverse shocks, he said.
The rapid spread of the coronavirus increased fears of a pandemic, with six countries reporting their first cases and the World Health Organization raising its global spread and impact risk alert to "very high".
The flip side of the equity selloff, on the other hand, is a global flight to safety that has driven down U.S. Treasury yields, on its own "a bullish factor for U.S. economic growth" that would keep borrowing costs lower, Bullard noted.
Many economists caution, though, that rate cuts and other Fed economic tools might not do much to blunt the economic damage resulting from the virus. 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.
St. Louis Fed President James Bullard discussing the effect of the new coronavirus on the global and USA economies during a presentation in Fort Smith, Ark., on February 28, 2020.
But with interest rates already low, the Fed has little room to maneuver to support growth in the event of an economic slowdown.
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Traders bet the Fed may be forced into an emergency move if the coronavirus gets much worse. Cutting rates between meetings is rare and reserved for especially delicate moments.
"There is an argument here for the Fed to act immediately and not wait until the March meeting", Blanchflower told FOX Business. Similar comments were issued after the October 1987 market crash and after the September 11, 2001, terrorist attacks.
The benchmark federal funds rate is between 1.5 percent and 1.75 percent. Bank of America Corp. forecast a half-point cut at the Fed's March meeting to "stem the panic in markets".
Investors are increasingly envisioning that the Fed will take action soon.
"My reading of the numbers that we have at hand-and I acknowledge this could change, I acknowledge the situation could deteriorate, I acknowledge the risks-but given what we know factually, it looks to me like the market has gone too far", the National Economic Council director said, adding, "I've seen this before and it could come back very rapidly".
The yield on the benchmark USA 10-year Treasury touched a record low of 1.2408 per cent.
The initial reaction from investors was muted, with the Dow Jones Industrial Average still down about 600 points about 30 minutes after the statement, though the Dow had been down roughly 780 points before it was issued.