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Jerome Powell says Ômicron threatens US economic recovery

Federal Reserve (Fed) President Jerome Powell is expected to speak on Tuesday (30) about how the Ômicron variant threatens the economic recovery of the USA.

Much remains unknown about the new variant. However, if the pandemic continues, it could keep prices rising, hurt job growth and exacerbate the supply chain crisis.

“The recent increase in Covid-19 cases and the emergence of the Omicron variant pose negative risks to employment and economic activity and increase uncertainty about inflation,” wrote Powell, in a statement due Tuesday to Senate Banking, Housing and Urban Affairs Committee.

Wall Street sold stocks and oil last Friday after learning about the new, potentially more infectious and immunity-resistant variant of the coronavirus.

However, the market regained much of the ground lost on Monday (29), after investors took a deep breath and saw a buying opportunity.

The same thing happened on Wall Street when the world first heard about the Delta variant. Soon after the scare, the market rebounded and hit new highs as vaccine availability spread and health officials learned how to better control the pandemic.

In his prepared testimony, Powell noted that the economy took a major hit in the summer when the Delta variant spread across the globe. Many Americans were afraid to travel, shop, eat in restaurants, and go back to work.

This kept them careful at home, exacerbating the labor shortages and supply chain crisis that held back the US economy.

But infections eased and the economy accelerated. Powell predicted the US economy would grow 5% this year. With the fall in infections, as of September, the labor market recovered and the unemployment rate dropped to 4.6% — the lowest since May 2020.

The US economy has been reflecting the rise and fall of infections, and the Ômicron variant threatens to undo much of the economic goodwill the country has generated over the past few months.

“Increased concern about the virus could reduce people’s willingness to work in person, which would slow progress in the job market and intensify supply chain disruptions,” Powell wrote in his testimony.

Powell, who President Joe Biden recently appointed to a second term as Fed chairman, said the supply-demand imbalance had artificially raised prices well above the 2% annual inflation target.

Americans spent about 5% more on goods and services this year, the Fed chairman noted.

“Inflation can come and stay a little longer,” he said. “The shortage of labor has caused wages (and prices) to increase. But with job growth accelerating in recent months, employers are finding fewer candidates for available positions — and they need to raise wages to attract new workers,” Powell added.

Reference: CNN Brasil

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