Fed’s Powell warns Omicron poses risks to US economy

Fed’s Powell warns Omicron poses risks to US economy

WASHINGTON: The Omicron variant of COVID-19 could slow the recovery of the US economy and labor market and also heighten uncertainty regarding inflation, Federal Reserve Chair Jerome Powell said in testimony released Monday. Powell has consistently said the recent spike in inflation would be transitory, but acknowledged that the factors pushing US prices higher will “linger well into next year.”

The comments to be delivered to the Senate Banking Committee on Tuesday indicate the central bank chief is growing more concerned about this year’s price increases, which has put pressure on the central bank to raise interest rates more quickly. The Fed slashed interest rates to zero in the early days of the pandemic and flooded the financial system with liquidity, which together with massive government aid helped to prevent a more damaging economic downturn.

While the US economy has “continued to strengthen,” the resurgence of the pandemic has dragged on the recovery, starting with the arrival of the Delta variant over the summer, he said. The latest strain, which first emerged in South Africa, has jolted global policy and health officials as they scramble to determine if Omicron is more infectious or more serious, and whether current vaccines will be as