Fed's Mester says China virus could drag on U.S. economy

By Jonnelle Marte

Feb 14 (Reuters) - The coronavirus epidemic, which has killed hundreds and sickened tens of thousands in China, could be a drag on the U.S. economy this quarter, Cleveland Federal Reserve Bank President Loretta Mester said on Friday.

"I expect that, certainly in China and perhaps in Asia, the first quarter numbers are going to be weaker; there could be spillover to the U.S. economy as well in the first quarter and it remains to be seen by how much and for how long that will persist," Mester told Bloomberg Television. "But in general I am seeing that as a risk to my forecast - I haven't marked down my forecast."

Fed policymakers have signaled they expect to keep short-term interest rates steady, within a range of 1.5% to 1.75%, for the foreseeable future. Unemployment is at 3.6%, inflation is expected to move back up to the Fed's 2% target, and job creation continues.

The data show the U.S. economy is in a "good place," Mester said, using a favorite phrase of Fed policymakers.

Several Fed officials, including Chair Jerome Powell, have also said they expect to see some impact on the U.S. economy from the coronavirus.

They have not, however, signaled expectations that the impact would lead to a "material change" to the outlook, the bar they have set for any further adjustment to rates.

(Writing by by Ann Saphir; Editing by Chizu Nomiyama and Richard Chang)

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