Federal Reserve Chair Jerome Powell says that the appearance of a new COVID-19 variant could slow the economy and hiring, while also raisi...
Federal Reserve Chair Jerome Powell says that the appearance of a new COVID-19 variant could slow the economy and hiring, while also raising uncertainty about inflation.
The recent increase in delta cases and the emergence of the omicron variant 'pose downside risks to employment and economic activity and increased uncertainty for inflation,' Powell said Monday in prepared remarks to be delivered to the Senate Banking Committee on Tuesday.
The new variant could also worsen supply chain disruptions, he said.
Powell's comments come after other Fed officials in recent weeks have said the central bank should consider winding down its ultra-low interest rate policies more quickly than it currently plans. They cited concerns about inflation, which has jumped to three-decade highs.
Yet Powell's remarks suggest that the additional uncertainty raised by the omicron variant may complicate the Fed's next steps.
Federal Reserve Chairman Jerome Powell will tell Congress that the appearance of a new COVID-19 variant could slow the economy and hiring
'Greater concerns about the virus could reduce people's willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,' Powell said.
While little is known definitively about the health effects of the omicron variant. If it were to cause Americans to pull back on spending and slow the economy, that could ease inflation pressures in the coming months.
Yet if the new variant causes another wave of factory shutdowns in China, Vietnam or other Asian countries, that could worsen supply chain snarls, particularly if Americans keep buying more furniture, appliances and other goods. That, in turn, could push prices even higher in the coming months.
Powell acknowledged that inflation 'imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation.'
He said most economists expect inflation to subside over time, as supply constraints ease, but added that, 'factors pushing inflation upward will linger well into next year.' At a news conference last month, Powell said high inflation could persist into late summer.
At their last meeting November 2-3, Fed policymakers agreed to start reducing the central bank's $120 billion in monthly bond purchases by $15 billion a month. That would bring the purchases to an end in June.
Those bond buys, an emergency measure that began last year, are intended to hold down longer-term interest rates to encourage more borrowing and spending. The Fed has pegged its short-term interest rate, which influences other borrowing costs such as for mortgages and credit cards, at nearly zero since last March, when COVID-19 first erupted.
Last week, the Fed released minutes from the November meeting that showed some of the 17 Fed policymakers supported reducing the bond purchases more quickly, particularly if inflation worsens. That would give the Fed the opportunity to hike its benchmark rate as early as the first half of next year.
At that time, investors expected three rate hikes next year, but the odds of that many hikes have fallen sharply since the appearance of the new coronavirus variant.
Powell speaks before the Senate Banking Committee, chaired by Sen. Sherrod Brown (D-Ohio)
The Consumer Price Index rose 6.2 percent in October 2021 from one year prior - the highest it has been since 1990
Fuel prices at a Shell gas station in San Francisco, California, U.S., on Thursday, Oct. 21, 2021. American drivers will continue to face historically high fuel prices as gasoline demand surged to the highest in more than a decade
Dollar Tree's stock price didn't seem to be hurt by the announcement, jumping nearly 10 percent to 144.90
President Joe Biden on Monday urged Americans to get vaccinated or get their booster shots amid warnings about the spread of the Omicron variant – but insisted that the infectious new variant was not a cause for 'panic' and said no new restrictions were needed.
'We'll fight this variant with scientific and knowledgeable actions and speed, not chaos and confusion,' Biden said at the White House.
But even amid the pressing nature of the new variant, Biden misstated the name of the variant. 'It's called the Omnicron,' he said, inserting an extra 'n' – an error his coronavirus advisor, Dr. Anthony Fauci, who was standing in the background, also committed on Sunday.
The World Health Organization (WHO) has warned the new variant, poses a 'severe' risk to the world's pandemic recovery and the odds of it being infectious enough to spread quickly are 'very high'. Hours after the speech the CDC strengthened their guidance to recommend that all adults get a booster.
Omicron, which was first identified in South Africa but is thought to have originated in Botswana, is the most-mutated form of Covid yet found and has been declared a 'variant of concern' by the WHO because early data suggests it is more infectious than the Delta strain.
South Africa's National Institute for Communicable Diseases (NICD) said the variant is fueling a surge in coronavirus hospitalizations in hot spots within the country. Gauteng, the province where the COVID-19 variant was first detected has suffered a more than 300 percent increase in virus related hospitalizations this week.
The number of children hospitalized with Covid has also risen sharply around South African's capital city of Pretoria, though the NICD said not all are at risk of severe disease and some cases could just be out of an abundance of caution.
When Biden addressed the US on Monday he said: 'You have to get your vaccine. You have to get the shot. You have to get the booster,' Biden said, speaking to the nation from the White House Roosevelt Room, which is now features a fireplace mantle decked out with holiday decorations.
'Sooner or later we’re going to see new cases of this variant here in the United States,' Biden predicted, a day after it had been identified in Canada.
But he cautioned: 'This variant is a cause for concern, not a cause for panic,' and said no additional measures were currently needed.
Asked if lockdowns were off the table, Biden responded: 'Yes, for now … If people are vaccinated and wear their masks, there’s no need for lockdowns.'
However, Moderna's CEO Stephane Bancel told CNBC just today that he's worried the vaccines currently available may not do enough to protect people from the newly-mutated virus – the antibodies Moderna's COVID-19 vaccine generates to fight against it could be eight times lower against Omicron.
The president fielded a few questions after his remarks, where he called the new variant 'Omnicron,' adding an 'n'
Biden asked Americans to mask when required, get vaccinated, and get boosted, and said he is 'sparing no effort.'
'We’re going to fight and beat this new variant as well,' he said.
He pleaded with the unvaccinated to 'go get that first shot.'
'The best protection against this new variant or any of the of the various ones out there ... is getting fully vaccinated,' Biden said.
'We do not yet believe that additional measures will be needed,' Biden said. But he said his team was already in touch with people from drug makers Pfzizer, Moderna, and Johnson & Johnson 'to develop contingency plans for vaccines or boosters if needed.'
Vice President Kamala Harris and Fauci both wore masks as they stood behind the president.
'As additional protection, please wear your masks indoors in public settings around other people,' he said.
Biden was pictured shopping at Murray's Toggery Shop in Nantucket without his mask on Saturday, despite the island's mask requirement for indoor facilities.
The fully-vaccinated president was caught flaunting the health guidelines just hours after he was 'fully briefed' on the concerning new variant. The island brought back its indoor mask mandates earlier this month at a town meeting on November 18. They made the decision to return to indoor masking because scientists found a prevalence of the virus in island sewage.
On Monday Biden also praised South African officials for reporting information about the new variant, but said the travel ban the U.S. imposed was meant to 'buy time' to give more people time to get vaccinated. South African officials have fumed that the UK, the U.S. and other nations slapped the travel warning on immediately after they brought forward the new information – likely saddling the nation with economic harm.
But Biden isn't pushing new travel restrictions, after the U.S. shut down travel from seven south African nations following initial reports out of South Africa. Those restrictions took effect today.
Also on Monday, White House Press Secretary Jen Psaki defended the limited decision to restrict travel during her regular press briefing - insisting the US wasn't looking to 'punish' any other nation.
'The objective here is not to punish, it is to protect the American people,' Psaki said.
'This is not going to prevent, it is going to delay and that delay is going to help us have necessary time to do the research...to get more people vaccinated.'
During his remarks Biden also urged 'everyone' to wear a mask in indoor settings, except when eating or drinking 'or speaking in a microphone' – as he was doing without a mask.
In addition to defending the new travel ban, Biden defended the nation's effort to pump out millions of vaccines for the world – a humanitarian effort that should also stem the creation of new variants.
'We can’t let up until the world is vaccinated,' Biden said.
'We’re throwing everything we can at this virus, tracking it from every angle.'
He said no vaccines shipped abroad 'will ever come at the expense of any American,' and pledged: 'I will always make sure our people are protected first.'
He spoke amid warnings – but also uncertainty – about whether the highly transmissible new variant could reshape or prolong the battle against the COVID-19.
Canada's health minister said the Sunday the variant had been detected there.
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