The President of the United States Federal Reserve (Fed), Jerome Powell, considers that “the recent increase in cases of COVID-19 and the emergence of the omicron variable present downside risks to employment and economic activity and increase uncertainty about inflation.”
Powell, who has been given a new mandate by Joe Biden to head the Federal Reserve (the central bank), believes that “the factors driving inflation higher will continue next year,” according to a speech he will deliver Tuesday morning to the Senate. Bank commission, published on Monday.
“Increased concern about the virus can reduce the desire to work in person, slow labor market progress and intensify problems in the supply chain,” he adds.
Supply problems caused many product shortages, which increased demand, and contributed to price increases.
Powell warns that inflation is “significantly above” the agency’s 2% target.
Inflation hit 5% in 12 months in October, the highest level since 1990, according to the Commerce Department’s personal consumption expenditures index.
“Problems in the supply chain have made it difficult for producers to respond to strong demand. Higher energy prices and rents are also driving up inflation.”
Although the Fed continues to believe that “inflation will fall significantly next year,” Powell acknowledges that the trend is “difficult to predict.”
Powell and Treasury Secretary Janet Yellen will be in Congress on Tuesday and Wednesday before the Senate Banking Committee and the House Financial Services Committee.
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