Federal Reserve Chairman Jerome Powell is expected to testify that the newly identified omicron variant of COVID-19 could cause worsening inflation and damage to the economy.
According to a report in The Washington Examiner, the recently nominated head of federal reserve as well as Secretary of the Treasury Janet Yellen will speak before the Senate Banking Committee where they will answer questions about the new variant, among other things.
“The recent rise in COVID-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said in prepared remarks for Tuesday’s testimony.
“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.”
Reports of the newest COVID-19 variant that hails from South Africa, have given rise to concern that it could increase the nation’s problems with inflation and the supply chain. However, it appears that all of that depends on how bad the omicron turns out to be, and whether it will be significantly worse than other strains of the virus.
“Markets plunged by the largest amount of 2021 on Friday after investors were spooked by omicron, which the World Health Organization has labeled a ‘variant of concern.’ Several countries have confirmed cases of the new variant, which is believed to have first emerged in southern Africa,” the Examiner reported.
“Biden decided to block off travel from several African countries out of fear that omicron could be deadlier or more resistant to vaccinations than previous strains, although experts believe it could take days or weeks to determine just how much of a threat it poses to the country.”
According to the Examiner, the pair will attempt to talk about how they can avoid a problem like what happened with the Delta variant just months ago. It was blamed for slowed economic growth and further inflation, which was outside of what the Fed had anticipated.
The Washington Examiner’s senior economic analyst, Mark Hamrick the question before many is whether vaccines will assist in stabilizing the economy or cause more of a struggle with omicron. According to Hamrick, there won’t likely be a huge economic disruption, but it could cause problems:
“The worst-case scenario would be that the efficacy of the vaccine, with respect to the variant, is lower than previous strains, and under those circumstances, I would fear that those who are vaccinated would then develop a fear or concern about the resumption of activities that has largely already been taking place,” Hamrick said.
Currently, concerns about COVID-19 have damaged multiple sectors of the economy, and another scare could cause further recession in the areas of department stores, theaters, etc.
“If there were an impact that would further disrupt the flow of goods, whether it’s manufacturing or transportation, then clearly that would risk either a sustained or further heightened bout of higher prices,” Hamrick said. However, he was also clear that he believes it’s too early to make a clear prediction.