Powell warned that Europe and the United States threatened the recovery of the U.S. economy
Federal Reserve Chairman Jay Powell will tell US lawmakers on Tuesday that the rising Covid-19 cases and the new Omicron variant are likely to jeopardize economic recovery and increase inflationary pressures.
Powell testified at a joint congressional hearing with Treasury Secretary Janet Yellen that although US consumer demand remains strong and workers are returning to the labor market, the potential for setbacks related to the pandemic Is casting a shadow on the economic outlook.
“The recent increase in Covid-19 cases and the emergence of Omicron variants have brought downside risks to employment and economic activity, and increased inflation uncertainty,” he said in a prepared speech released on Monday.
“Bigger concerns about the virus may reduce people’s willingness to work in person, which will slow the progress of the labor market and exacerbate supply chain disruptions.”
Powell, recently appointment President Biden will testify before the Senate Banking Committee at a time when the U.S. economy is fragile, that the U.S. economy is struggling to cope with the highest inflation rate in about 30 years.
In his statement, Powell emphasized that price increases in certain regions are “significant” and that factors pushing up inflation may “continue until next year”. However, as the imbalance between supply and demand gradually disappears, he still expects inflation to weaken “significantly” next year.
His remarks came as senior central bank officials started a broader debate on how the Fed should manage this disturbing period of high inflation, which seems to last much longer than expected.
If the outgoing vice chairman Richard Clarida is confirmed by the Senate, he will be replaced by Governor Lael Brainard. Open Earlier this month, the Fed accelerated its so-called reduction or reduction of its $120 billion asset purchase program. It started to reduce its debt purchases at a rate of US$15 billion per month this month, which indicates that the stimulus measures will end in June.
However, this possibility was raised before Omicron’s variant triggered a global alarm, injecting greater uncertainty into the Fed’s policy path.
Powell vowed again on Monday that the Fed will take action when necessary to curb inflation, acknowledging the costs of rising prices. Reducing inflation is also an important priority of the Biden administration, and its latest spending bill is facing strong opposition from Republicans and even some moderate Democrats.
Powell said: “We understand that high inflation will place a heavy burden on people, especially those who cannot meet the higher costs of necessities such as food, housing and transportation.” “We will use our tools to support the economy and a strong workforce. Market and prevent higher inflation from becoming entrenched.”
Investors expect the Fed to raise interest rates twice next year, and the first adjustment will be made as early as the third quarter.
U.S. Treasury bonds rose because of Powell’s remarks, and the yield on the two-year Treasury bond, the most sensitive to monetary policy, fell 0.01 percentage points to 0.48% that day. Just before the release of the prepared testimony, its trading yield was 0.51%.
Additional report by Eric Platt