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Jerome Powell said the recent rise in COVID cases and new variants could “slow down progress” in the labor market.
Federal Reserve Chairman Jerome Powell, in his first public remarks on the omicron variant of coronavirus, said it poses risks to both sides of the central bank’s mandate to achieve stable prices and maximum employment.
“The recent rise in Covid-19 cases and the emergence of the omicron variant exacerbate poor risks to employment and economic activity and uncertainty about inflation,” Powell said in a testimony released Monday, a day before his appearance before the Senate Banking Committee. . “Greater concern about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and increase supply chain disruptions.”
Powell, in a relatively short text, did not discuss specific monetary policy actions or the possibility of changing the pace of the reduction in the purchase of his assets – a key issue noted by other officials in recent notes.
Powell – who was elected by President Joe Biden a week ago as head of the central bank for a second term – will appear before the table on Tuesday at 10 a.m. along with Finance Secretary Janet Yellen for the first two days of congressional oversight hearings. pandemic incentive. The House Financial Services Commission will continue with a separate trial on Wednesday.
For his part, Yellen said in notes prepared for the panel that while news of the omicron variant is being followed, “at this point, I’m sure our recovery will continue to be strong.”
Yellen also asked the Senate to pass Biden’s social spending bill, known as Build Back Better, and warned lawmakers that they should soon raise the nation’s debt limit. He had previously stated that the Treasury could run out of cash from 15 December.
“I can’t say too much about how critical it is for Congress to address this issue,” Yellen said of the debt limit. “If we don’t do it, we will erase our current recovery.”
The discovery of a new variant of Covid-19 has caused new uncertainty over the economy. Governments around the world have stepped up travel restrictions and the World Health Organization has warned that omicron strains could lead to a new rise in infections.
Although employment has grown exponentially this year, “there is still room for maximum employment to be covered for both employment and labor, and we expect progress to continue,” Powell said, adding that unemployment continues to fall “disproportionately” among blacks and Hispanics. .
Even among the challenges posed by the pandemic, the U.S. economy is moving forward. JPMorgan Chase & Co. economists have raised their annual growth estimate to 5% for the last three months of the year. The rise has boosted high inflation as consumer prices rose at the fastest pace in 30 years in October.
“Most forecasters, including the Fed, continue to expect inflation to fall sharply next year as supply and demand imbalances narrow,” Powell said. “It is difficult to predict the sustainability and consequences of supply cuts, but it seems that the factors driving inflation will continue next year.”
Fed officials have discussed in recent weeks the possibility of accelerating the pace of reducing central bank purchases of monthly assets, which would allow interest rates to rise sooner rather than later if price pressures are to be kept under control next year.
“I’m very open to accelerating the pace of our slowdown in purchases,” Atlanta Fed President Raphael Bostic, a voter for the Federal Open Market Commission that sets policies this year, told Fox News on Friday. Mary Daly, president of the San Francisco Faith, who is also a voter this year and has had a tidy voice on politics, told Yahoo! Finance would have accepted a faster pace of cuts earlier last week if inflation remained too high. Daly’s interview was conducted before the omicron news broke.
Faith officials will see the November CPI and employment reports from Dec. 14-15 before the final meeting of the year.
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