By Michael S. Derby 

Federal Reserve Bank of St. Louis President James Bullard said Friday the coronavirus situation could cause the central bank to lower rates, but so far, he doesn't think lowering the cost of short-term borrowing is needed, in part because of rate cuts made last year.

"Further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time," Mr. Bullard said in materials prepared for a presentation in Fort Smith, Ark.

The Fed lowered rates three times in 2019 as it sought to offset risks to the U.S. economy from trade policy uncertainty and slowing global growth. Mr. Bullard reiterated in his presentation that the shift in monetary policy by the Fed has had an stimulative impact beyond the actual scope of the rate cuts, given how other asset prices reacted. That stimulus is still affecting the economy and will help the U.S. navigate the current situation of uncertainty, he said.

The Fed "is in a good position because of previous policy rate cuts designed to insure the economy against adverse shocks," Mr. Bullard said. "Policy rate decreases have an effect on the U.S. economy with a lag, so last year's rate reductions are likely to continue to have an influence as the coronavirus tragedy unfolds," he added.

Mr. Bullard also said the very sharp decline in Treasury yields seen over recent days -- the 10-year note yield hit a record low amid investors seeking a safe place to park their money -- should also help buoy the economy. "Longer-term U.S. interest rates have been driven lower by a global flight to safety, likely benefiting the U.S. economy," he said.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

February 28, 2020 09:32 ET (14:32 GMT)