Fed Chair Powell says COVID variant poses risks to both sides

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.

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The rise in COVID 19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity, and there is greater uncertainty for inflation, Powell said in prepared testimony released Monday, a day ahead of his appearance before the Senate Banking Committee. There are increased concerns about the virus, which would slow progress in the labor market and increase supply-chain disruptions, and make it harder for people to work in person. 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 was selected by President Joe Biden for a second term as central bank chief a week ago, will appear before the panel Tuesday at 10 a.m., along 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 hold a separate hearing on Wednesday.

The discovery of the new variant of Covid 19 has resulted in new uncertainty about the economy, according to U.S. central bankers. There was a surge in infections as governments around the world stepped up restrictions on travel and the World Health Organization warned that the omicron strain could cause a new surge in infections.

According to Powell, joblessness continues to fall on Black and Hispanics despite strong job growth this year, there is still room to reach maximum employment for both employment and labor force participation.

The U.S. economy is moving ahead, despite the challenges posed by the epidemic. The economists at JPMorgan Chase Co. have increased their estimate for annualized growth to 7% from 5% for the last three months of the year. Consumer prices went up in October at the fastest pace in 30 years, fueled by the boom.

Most forecasters, including at the Fed, believe thatinflation will move down dramatically over the next year, as supply and demand imbalances abate, Powell said. It is hard to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. Fed officials discussed the possibility of speeding up the speed at which they scale back the central bank's monthly asset purchases, which would give them the option to raise interest rates sooner than otherwise next year if needed to keep price pressures in check.

In an interview Friday, Atlanta Fed President Raphael Bostic, a voter for the policy-setting Federal Open Market Committee, said I am very open to accelerating the pace of our slowdown in purchases. San Francisco Fed President Mary Daly, who is also a voter this year and has been a dovish voice on policy, told Yahoo! Finance said earlier in the week that she would accept a faster pace of tapering if inflation continued to run too high. The interview was conducted before the news of omicron broke.

Fed officials will see reports on CPI and employment for November before their final meeting of the year on December 14 - 15.

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