Jerome Powell: Omicron Raises Economic Risks And Increases Inflation Uncertainty

In his first public statements about the new strain of the Corona virus, US Federal Reserve Chairman Jerome Powell confirmed that “Omicron” poses a threat to the central bank’s missions in achieving price stability and maximum employment.

Jerome Powell said, in prepared testimony published yesterday, Monday, or one day before his appearance before the US Senate Banking Committee: “The recent increase in the number of cases of Covid-19 virus, and the emergence of the viral “Omicron” variant, poses a negative threat to the Employment and economic activity, and contribute to increased uncertainty around the rate of inflation. People’s willingness to work may decrease directly due to exacerbating concerns about this virus, which leads to slowing progress in the labor market and increasing confusion in supply chains.”

In his relatively brief testimony, Powell did not discuss specific monetary policy measures or the possibility of changing the pace of easing asset purchases – an important issue that other officials have highlighted in recent statements.

Powell will appear before the committee today, Tuesday, at 10 a.m., with Treasury Secretary Janet Yellen on the first day of congressional supervisory hearings, which will last for two days, to follow up on stimulus packages related to confronting the pandemic. They will be followed by separate hearings before the House Financial Services Committee on Wednesday.

US central bank leaders are dealing with a new phase of uncertainty facing the economy in the wake of the discovery of the ‘Omicron’ variable.

Governments around the world have increased travel restrictions and the World Health Organization has warned that the Omicron strain could increase the number of infections.

How did the world rise up to confront “Omicron”?

Although the number of jobs has grown strongly this year, Powell said, “There is still a distance to go to reach maximum employment in terms of both employment and labor force participation, and we expect continued progress,” adding that the burden of unemployment still falls “disproportionately” on The shoulders of Hispanics and black Americans.

Inflation
The US economy is making solid progress even amid these challenges posed by the pandemic. JPMorgan economists raised their estimates of the annual growth rate to 7% from 5% for the last three months of this year. The recovery led to a rise in the inflation rate, with consumer prices increasing during the month of October at the fastest pace in thirty years.

Goldman Sachs outlines 4 scenarios for Omicron’s impact on the global economy

“Most of those who forecast the economy, including the Federal Reserve, still expect inflation to fall significantly over the next year as the causes of the supply-demand imbalance fade. Although it is difficult to predict the persistence and impact of supply chain disruptions,” Powell said:

 

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Jerome Powell: Omicron Raises Economic Risks And Increases Inflation Uncertainty - /10

Summary

In his first public statements about the new strain of the Corona virus, US Federal Reserve Chairman Jerome Powell confirmed that “Omicron” poses a threat to the central bank’s missions in achieving price stability and maximum employment.

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