(PresidentialInsider.com)- According to Federal Reserve Chairman Jerome Powell, the Omicron variant of COVID-19 coupled with the recent surge in COVID cases throughout the country pose a threat to the economy and complicate the already-uncertain inflation outlook.
In his remarks to Senate lawmakers on Tuesday, Powell warned that the emergence of the Omicron variant could pose risks to employment and economic activity, further increasing the uncertainty for inflation. Increased concerns over the virus “could reduce people’s willingness to work in person,” Powell explained. This could slow job growth and intensify the current supply-chain disruptions.
If only we had a responsible news media that honestly reported the news instead of ginning up panic and fear every time a new COVID variant is discovered.
Both Powell and Treasury Secretary Janet Yellen appeared before the Senate Banking Committee on Tuesday. Part of the March 2020 COVID relief legislation requires the Fed chair and Treasury Secretary to report to Congress each quarter.
In his remarks to the Senate, Powell also discussed the challenges in forecasting the persistence of the current inflation and the impact of supply constraints. However, Powell admitted that as it now stands, inflation will be pushed upward and will linger well into next year.
Powell said many forecasters, including some at the Fed, are predicting inflation will move down significantly over the next year once bulked-up supply chains overtake cooling demand for goods.
When news of the latest COVID variant broke last week, investors ditched US stocks and flocked to the relative safety of treasury bonds, pushing back their expectations on future Fed rate increases. The Dow Jones Industrial Average dropped 900 points, clinching its worst session of the year. Markets rebounded somewhat on Monday.
Last week, 25 percent of US investors believed the Fed would still have interest rates near zero as late as June 2022, with 75 percent betting the Fed would increase rates at least once by the same date. Now that spread has narrowed in large part due to concerns over Omicron. Thirty-five percent of investors now believe the Fed will still have rates near zero by June 2022.