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Omicron variant cases spread and countries rush to impose travel bans


Federal Reserve Chairman Jerome Powell speaks during an event in the South Court Auditorium of the White House complex in Washington, DC, on November 22.
Federal Reserve Chairman Jerome Powell speaks during an event in the South Court Auditorium of the White House complex in Washington, DC, on Nov. 22 (Susan Walsh/AP/File)

Federal Reserve Chairman Jerome Powell will testify on Tuesday that the Omicron variant threatens the US economic recovery.

There are still many unknowns about Omicron. However, if the pandemic drags on, it could cause prices to soar, hurt job growth and make the supply chain crisis worse, Powell is expected to tell Congress. .

“The recent increase in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty over inflation,” Powell wrote. in testimony prepared to be presented Tuesday before the Senate Committee on Banking, Housing, and Urban Affairs.

Wall Street sold off stocks and oil on Friday after learning of the highly infectious and more immune-resistant variant. But the market regained much of its lost ground on Monday after investors breathed a sigh of relief and sensed a buying opportunity.

Stocks suffered a similar sell-off when Wall Street first heard of the Delta variant, but it quickly recovered and surged to new record highs as vaccine availability spread and health officials spread. learned how to better manage the pandemic.

In his prepared testimony, Powell noted that the economy took a big hit over the summer as the Delta variant spread globally. Many Americans are afraid to travel, shop, eat at restaurants, and go back to the office. That kept caregivers at home, exacerbating labor shortages and a supply-chain crisis that has gripped the US economy.

However, infections declined throughout the fall, and the economy struggled. Powell predicts the US economy will grow strongly by 5% this year. As infections subsided, starting in September, the job market recovered and the unemployment rate dropped to 4.6%, the lowest level since May 2020.

The economy was already in recession and flowing with the epidemic rising and falling, and Omicron threatened to undo much of the economic goodwill the US had built during the fall months.

“Grower concerns about the virus could reduce people’s willingness to do in-person work, which will slow progress in the labor market and intensify supply chain disruptions,” Powell wrote in the letter. his testimony.

Powell, who recently stepped down as Fed chairman for a second term, said the supply-demand imbalance had artificially pushed prices above the Fed’s 2% annual inflation target. Powell noted that Americans have spent about 5% more on goods and services this year.

Inflation could be here for a little longer, Mr. Powell said. It’s a bit of a Catch-22: The labor shortage has driven wages (and prices) higher, but with job growth accelerating in recent months, employers are finding fewer applicants. employees for their existing jobs – and they have to raise wages to attract new workers.

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