The central bank chief is concerned about the new Corona variant.
(Photo: AP)
Washington According to Federal Reserve Chairman Jerome Powell, the emergence of a new variant of the corona virus could slow down the economy. The Omicron variant and the recent surge in new coronavirus infections from the Delta variant posed risks to employment and economic activity, and heightened uncertainty about inflation, Powell said in a speech he gave to the Senate Banking Committee on Tuesday wanted to. The new variant could also exacerbate supply chain problems.
“Greater concern about the virus could reduce people’s willingness to work locally, which would slow labor market progress and exacerbate supply chain disruptions,” Powell said, according to the pre-released speech manuscript. It is not yet known whether the Omikron variant can be transmitted more quickly or whether the disease is more severe than the previously dominant Delta variant.
However, if it causes Americans to be reluctant to spend and slow the economy, it could ease inflationary pressures in the months ahead. Inflation is currently higher in the United States than it has been in 30 years. However, should factories in China, Vietnam, or other Asian countries close again, it could put even more strain on supply chains, especially if Americans continue to buy more furniture, appliances, and other goods. That, in turn, could push prices even higher in the coming months.
Inflation could last longer than expected
Powell acknowledged that inflation “puts a significant strain, especially on those who are less able to bear the higher costs of essentials like food, housing and transportation.” Most economists expected inflation to decline over time as supply constraints eased. But Powell added that the factors driving inflation higher would last well into next year.
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According to Powell, the high inflation could last longer than originally expected. In the coming year, the strong inflation should slow down again and demand should come into a better equilibrium, said Powell. “It is difficult to predict the duration and impact of the supply bottlenecks. But it currently appears that factors driving inflation will persist for the next year, ”Powell added. With the rapid improvement in the labor market, the doldrums are also receding and salaries are rising at a brisk pace.
Powell promised that the US Federal Reserve (Fed) would stand by its price stability target. The central bank will support the economy and the labor market and prevent a price spiral. Inflation is higher than it has been in three decades. In the markets, it is expected that the interest rate turnaround will be initiated in June 2022 under Powell’s leadership. Then the key monetary policy rate could be raised by a quarter of a percentage point. It is currently held in a range of zero to 0.25 percent.
Finance ministers calls for an increase in the debt limit
US Treasury Secretary Janet Yellen calls on Congress to raise the debt limit so as not to jeopardize the recovery of the US economy. Although she is “at this point in time” confident that US economic growth will remain strong, failure to solve the debt problem would “undermine the quite remarkable recovery,” wrote Yellen on Monday in her remarks for a hearing of the Senate Banking Committee on Tuesday.
Yellen continues to push for a permanent solution to the debt dispute: An impending insolvency of the USA was averted for the time being in October with a slight increase in the debt ceiling. Without this step, the US would no longer have been able to meet its payment obligations. The agreement gives the world’s largest economy until December 3rd. This is not a breather, however, as Democrats and Republicans have to find a permanent solution to the cap in the meantime.
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