On Monday afternoon, Federal Reserve Chairman Jerome Powell said that the recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to U.S. employment and economic activity and increased uncertainty for inflation.
“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 pointed out in the testimony prepared for a hearing before the Senate Banking Committee.
Pandemic-related supply and demand imbalances have contributed to notable price increases in some areas, with the price index for personal consumption expenditures up 5 percent over the 12 months ending in October.
“It is difficult to predict the persistence and effects of supply constraints, but it now appears that factors pushing inflation upward will linger well into next year. In addition, with the rapid improvement in the labor market, slack is diminishing, and wages are rising at a brisk pace,” he said, adding that the central bank understands that high inflation imposes significant burdens, especially on those less able to meet the higher costs of essentials like food, housing, and transportation.