Janet Yellen and Jerome Powell appear before the Senate Banking Committee in Washington on Tuesday.ALEX WONG (AFP)
Those responsible for the Economy and the US central bank (Fed) are examined each month before the Committee on Banking, Housing and Urban Affairs of the US Congress. But this time, in the appearance of Janet Yellen and Jerome Powell in the Senate an issue has crept off the agenda: the risks that the new omicron variant of the coronavirus introduces in the economic outlook and in the course of the pandemic, at a juncture of great inflationary pressure, with prices at highs for three decades.
Powell has assured that inflation is likely to continue into next year due to the uncertainty generated by the new omicron variant of the coronavirus. After months of arguing that the rise in prices was due to transitory factors, the head of the US central bank has been clear: “The time has probably come to stop using that word (…) The risks of more persistent inflation have increased”. The new strain, he stressed, carries risks for the labor market and to straighten the path of inflation. “The recent increase in cases of covid-19 and the appearance of the omicron variant poses downside risks for employment and economic activity and increases uncertainty due to inflation,” he stressed.
“It is difficult to predict the persistence and effects of supply constraints, but right now everything seems to indicate that the factors driving inflation up will continue well into next year,” Powell said. In an environment of risk aversion, the main Wall Street indices fell by more than one point on Powell’s announcement that the withdrawal of stimulus could accelerate from planned plans (a disconnection of $ 15 billion a month , starting this month and until mid-2022, as announced on November 3).
Fear of contagion would slow down the recovery of the labor market and “intensify” the congestion of supply chains, has pointed out the president of the US central bank, who was reconfirmed in the position by President Joe Biden last week and is pending the Senate approval.
“The recent increase in COVID-19 cases and the appearance of the omicron variant poses downside risks for employment and economic activity and greater uncertainty for inflation,” Powell stressed. “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 warned.
However, despite the massive resignation of workers in many sectors, labor market conditions continue to improve, he said. “We have achieved full employment two years ahead of schedule,” stressed Yellen, a message frequently replicated by the White House.
The members of the Senate committee recalled the advisability of President Biden filling vacant positions on the Fed’s board of directors. Republicans expressed their fear that the Democratic president would opt for “radicals” in favor of stricter regulation for some of vacant positions.