Omicron could cause significant problems for the global economy, says Yellen

The omicron variant of COVID-19 could slow global economic growth by exacerbating supply chain problems and depressing demand, said US Secretary of the Treasury Janet Yellen.

Yellen cited great uncertainty about the impact of the new variant, first detected in South Africa, given the severe US economic slowdown caused by the appearance of the delta variant this year.

“Hopefully it is not something that slows economic growth significantly.“, said Yellen, adding that “There is a lot of uncertainty, but it could cause major problems. We are still evaluating it”.

He claimed that the new strain of the coronavirus could exacerbate supply chain problems and drive inflation, but it could also depress demand and cause slower growth, easing some of the inflationary pressures.

The former head of the Federal Reserve (Fed) stated that she is ready to withdraw the word “transitory”To describe the current state of inflation that complicates the recovery of the United States from the pandemic of COVID-19, replicating comments from Fed Chairman Jerome Powell this week.

“I am ready to withdraw the transitory word. I agree that this has not been an adequate description of what we are dealing with.Yellen said.

Powell told lawmakers this week that the word meant different things to different people, sowing some confusion, and that it was a good time to explain more clearly what was meant.

Solid economy

Yellen He insisted that Joe Biden’s government stimulus spending this year was not the main driver of consumer prices, which hit 31-year highs in October and are more than double the Fed’s flexible inflation target. of 2% per year. He blamed the price hike primarily on supply chain problems and a mismatch between supply and demand.

Yellen He claimed that the US $ 1.9 trillion American Rescue Plan approved by Congress this year helped vulnerable people overcome the worst of the pandemic and underpinned the strong American economy.

While it may have contributed to inflation “a bit”, He said that the increase was due in large part to the pandemic and the huge shift in consumption towards goods from services.

He assured the Fed should closely monitor wage increases to avoid the kind of “spiral of prices and wagesDamaging and long-lasting that was seen in the 1970s.

Yellen, who led the Fed from 2014 to 2018, said it was up to the central bank to decide what to do with interest rates, but noted that a strong US economy, which would likely spike the cost of borrowing, is generally a good thing for the rest of the world.