Wall Street is certain the Fed will slash interest rates next month. But a key official says that will only happen if the coronavirus becomes a pandemic.

The comments were the latest sign the central bank would maintain a wait-and-see approach to the outbreak.
But Wall Street expectations for rate cuts have risen dramatically in recent days.
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St. Louis Federal Reserve President James Bullard said Friday that interest rates would be cut only if the coronavirus worsened, the latest sign the central bank would maintain a wait-and-see approach to the outbreak.

"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," Bullard said in remarks prepared for a presentation in Arkansas.

Other policymakers have said they would closely monitor the respiratory illness COVID-19 but emphasized it was too soon to determine whether the central bank would need to step in. Stocks suffered their worst week since the 2008 financial crisis after the government warned on Tuesday that it would almost certainly spread through communities in the US.

The World Health Organization has warned that the illness, which rapidly spread to more than four dozen countries over a period of days, has the potential to be labeled a pandemic. With stringent restrictions on travel and commerce and growing concerns about the outbreak, economists have lowered growth forecasts sharply for the year.

Wall Street expectations for rate cuts have risen dramatically in recent days. Markets are currently pricing in a 100% chance that the central bank will lower its benchmark interest rate in March, according to the closely watched CME FedWatch tool .

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