Washington, Nov 30, : The recent increase in Covid-19 cases, and the emergence Omicron variant, pose downside risks for US employment and economic activity, Federal Reserve Chairman Jerome Powell stated in written testimony.Powell said Monday afternoon that “greater concerns about the virus could decrease people’s willingness work in person, which will slow progress in the labor marketplace and intensify supply chain disruptions,” in testimony prepared for a hearing before Senate Banking Committee on Tuesday morning.
Powell pointed out that pandemic-related demand and supply imbalances have led to notable price increases for some areas.The price index for personal consumption expenditures rose 5% over the 12 month period ending in October, Xinhua news agency reported.
It is hard to predict the persistence or effects of supply constraints.However, it appears that factors that push inflation upwards will continue well into next year.
He also stated that slack in the labor market is decreasing and wages are rising at an accelerating pace.
Powell said that the central bank recognizes that high inflation can impose significant burdens on those who are less able to pay the higher costs of essentials such as food, housing, transportation, and so on.
“We are committed towards our goal of price stability.He stated that we will use our tools to support the Economy, a strong labor market, and to prevent higher inflation becoming entrenched.”
The Fed has committed to keeping the federal funds rate at its record-low level of close to zero since the outbreak of the pandemic.In November, the central bank began to reduce its monthly asset purchases of $120 billion by $15 Billion.
This pace would see the Fed end its asset purchases by June 2022.
According to Oxford Economics’ Monday analysis, it is too early to assess the economic and health consequences of the Omicron variant.
The analysis stated that “if the Omicron variant has a significant effect on the economy”, governments and central banks would likely concentrate their response on the demand effects rather than the more ambiguous impact on inflation.
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