Fed’s Powell Poses Downside Risk to Economy, Complicates Inflation Outlook

Source: MarketWatch

Federal Reserve Chairman Jerome Powell stated that the Omicron variant of Covid-19 poses a threat to the U.S. economy. DXY down -0.49%, EUR USD +0.65%

• In remarks to Senate lawmakers, Powell stated that the recent rise in COVID-19 cases and the emergence of the Omicron variant cause downside risks to employment and economic activity and heightened uncertainty for inflation.
• Powell further stated that there are greater concerns about the variant triggering people to reduce their willingness to work in person and slow the progress in the labor market.
• Fed watchers have mixed feelings over what the spread of Omicron means for the Federal Reserve policy.
• Until the recent news of the new Covid-19 variant, Fed watchers were thinking the central bank was readying to accelerate the pace of the tapering of its asset purchases.
• Meanwhile, others thought that omicron will cause the Fed to adopt a more patient approach.