Omicron, risk to the US economy: J. Powell

The president of the United States Federal Reserve (Fed), Jerome Powell, believes that the recent increase in Covid-19 cases and the emergence of the Omicron variant present risks to employment, economic activity and increase uncertainty about inflation .

Powell, who was ratified by US President Joe Biden for a new term at the head of the Fed, believes that “the factors that drive inflation upward will persist next year,” according to a speech he will deliver today to the committee. Senate bank, and which was published yesterday on the agency’s website.

“Increased concern about the virus could reduce people’s willingness to work in person, slowing progress in the job market and intensifying supply chain disruptions,” he noted.

In his speech, the head of the central bank said that, with an estimate of Gross Domestic Product growth of around 5% for 2021 and an unemployment rate of 4.6%, the economy and the labor market are strengthening.

However, he expressed concerns regarding the price increase.

“Problems in the supply chain made it difficult for producers to respond to robust demand. Rising energy prices and rents are also driving inflation, ”he said.

The prices of products and services in the United States accelerated at an annual rate of 5% at the end of October, their highest level since 1990, according to the PCE index of the Department of Commerce. That level is above the central bank’s 2% target.

Although the Fed continues to see inflation moving significantly lower next year, Powell acknowledges that the trend is “difficult to predict.”

“We understand that high inflation imposes significant burdens, especially on those who are less able to cover the higher costs of basic commodities such as food, housing and transportation. We are committed to our objective of price stability ”, he added.

“We will use our tools both to support the economy and a strong labor market and to prevent higher inflation from taking hold.”

Jerome Powell and Treasury Secretary Janet Yellen will be in Congress today and tomorrow before the Senate Banking Committee and the House Financial Services Committee.

“ECB, equipped to face the new variant of the virus”

The Omicron variant threatens the global economic reactivation.

However, Christine Lagarde, President of the European Central Bank (ECB); Luis de Guindos, vice president of the same body, and Francois Villeroy de Galhau, governor of the French central bank, were optimistic about this new risk.

“There is an obvious concern about the economic recovery in 2022, but I think we have learned a lot,” Lagarde told Italian broadcaster RAI.

“Now we know our enemy and what action to take. We are all better equipped to respond to the risk of a fifth wave or the Omicron variant, ”he said.

In an online financial conference, Villeroy de Galhau said that “obviously we must closely monitor the latest developments of Covid and the new strain Ómicron, but the economic effects of successive waves have so far proven to be less and less damaging and presumably, it shouldn’t change the economic outlook too much. “

ECB Vice President Luis de Guindos acknowledged that there is “a lot of uncertainty” but argued that much higher vaccination rates should help Europe better cope with these risks.

He stressed that at the moment the element that worries the most is inflation and added that it is important that monetary policy keeps all options open. (Reuters)

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