The Federal Reserve Board has said that the coronavirus outbreak presents a "new risk" to the economic outlook for the US and warned of disruptions in global markets.
Its comments spooked global stock markets, with European markets retreating from record highs and US stocks halting a four-day rally.
"Because of the size of the Chinese economy, significant distress in China could spill over to US and global markets through a retrenchment of risk appetite, US dollar appreciation, and declines in trade and commodity prices," the US central bank said in its semi-annual report to Congress.
"The effects of the coronavirus in China have presented a new risk to the outlook," the Fed said.
The coronavirus has claimed more than 600 lives since its outbreak in China. Some economists have started to mark down their first-quarter US growth estimates as China’s economy is expected to slow due to the coronavirus outbreak.
"The market moved up so quickly over the last few days and I think papered over the continued risk associated with the coronavirus," said Robin Anderson, senior global economist at Principal Global Investors.
"There’s still a lot of unknowns out there."
New data showed the US jobs market remains durable. Payrolls increased by a stronger-than-expected 225,000 workers and average hourly earnings climbed 3.1% from a year earlier.
US central bankers kept their benchmark interest rate unchanged at their meeting last month after cutting three times in 2019.
Forecasts released in December show that most of them expect to stay on hold through 2020.