USA: Federal chief says Omicron poses ‘downside risks’

Jerome Powell said the recent rise in COVID cases and the new variant could ‘slow progress’ in the labour market.n

US Federal Reserve Chair Jerome Powell, in his first public remarks on the omicron variant of the 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 pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said in prepared testimony released Monday, a day ahead of his appearance before the Senate Banking Committee. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”

Powell, in the relatively brief text, didn’t discuss specific monetary policy actions or the possibility of changing the pace of the tapering of its asset purchases — a key issue that other officials have flagged in recent remarks.

Powell — who a week ago was selected by President Joe Biden for a second term as central bank chief — will appear before the panel Tuesday at 10 a.m., together with Treasury Secretary Janet Yellen, in the first of two days of congressional oversight hearings related to pandemic stimulus. The House Financial Services Committee will follow with a separate hearing Wednesday.

For her part, Yellen said in prepared remarks to the panel that while she is following news about the omicron variant, “at this point, I am confident that our recovery remains strong.”

Yellen also called on the Senate to pass Biden’s social-spending bill known as Build Back Better, and warned lawmakers they must soon raise the nation’s debt limit. She previously indicated the Treasury could run out of cash potentially after Dec. 15.

“I cannot overstate how critical it is that Congress address this issue,” Yellen said of the debt limit. “If we do not, we will eviscerate our current recovery.”

The discovery of the new variant of Covid-19 has triggered fresh uncertainty over the economy. Governments around the world stepped up restrictions on travel and the World Health Organization warned that the omicron strain could fuel a fresh surge in infections.

Source: CNN, Al jazeera, Bloomberg and other sources.

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