The former Federal Reserve chairwoman Janet Yellen said during an event in Michigan that the coronavirus epidemic could throw the American economy into a recession.
“We could see a significant impact on Europe, which has been weak to start with,” she said, “and it’s just conceivable that it could throw the United States into a recession,” she added.
She explained that if it doesn’t hit the United States in a substantial way then a recession would be less likely, adding that the US had a solid outlook before the spread of the illness took place.
When talking about the 10-year Treasury yield, she pointed out that this week it fell to historic lows.
“Yields have plunged as fears about the spreading coronavirus have rocked global financial markets,” she explained, adding that market participants will expect support from the Federal Reserve as it still has room for maneuver compared to other central banks from developed countries, as the interest rates despite being low, are still higher compared to those imposed by its first world counterparts.
“The Fed does have some scope — it’s not a cure-all. But it will provide a little bit of support to consumer spending and to the U.S. economy and for financial markets,” she explained, adding that if the problem becomes very serious then the fiscal policy could play a more active role.
Previously Yellen warned against the potential coronavirus effects on the economy but highlighted that previous virus outbreaks have had little effect on the performance of the economy.
By 8:35 GMT the US dollar went up against the Canadian dollar gaining 0.01 percent. On the other hand, it went down against the Swiss Franc by 0.52 percent falling to the 0.9716 level and lost 0.44 percent against the Japanese Yen, falling to the 109.94 level.