Federal Reserve Chairman Jay Powell, addressed today before the United States Congress two themes that have expectation in that country and the whole world: the impact of the new variant of the coronavirus, micron, and persistent inflation.
Powell regretted that the word “transitory” is no longer the most accurate term to describe the nature of the high rate of inflation in the economy. He even said that “it’s probably a good time to withdraw that word “(transitory).
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“Usually, the higher prices we are seeing are related to the supply and demand imbalances that can be detected from the pandemic and the reopening of the economy, “said the Fed president during a hearing before the Senate Banking Committee.
“But it is also happening that price increases have spread much more widely … and I think the risk of higher inflation increased“.
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In excerpts from his speech advanced to Financial times, Powell admit that the rise of infections and micron “pose downside risks to employment and economic activity and one greater uncertainty for inflation“.
According to economists interviewed by the Wall street journal, micron could slow global growth, but estimate that the impact is likely to be modest, even though the extent of damage will depend on the potency of the strain itself, according to economists.
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The forecast they share is that probably tourism spending weakens and maybe also spending in restaurants as well as shopping in commercial stores.
In any case, they do not foresee that the effect will be as serious as when the first wave of Covid-19 occurred in March 2020 and as when the Delta variant impacted months ago. And part of the explanation would be that each new strain of the virus had a smaller economic impact than the previous ones.
And when evaluating measures to curb infections, the key in terms of economic impact is the eventual restrictions on travel.
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In that sense, yesterday the US president, Joe Biden, said that his government focus on increasing vaccination instead of look for new restrictions on commercial activity.
“It is the restrictions that are imposed in response to the virus that cause most of the economic damage,” Neal Shearing, chief economist at Capital Economics, told the newspaper. WSJ.
“So the key question is how governments will respond as Omicron spreads. This, in turn, will depend on the extent to which it escapes vaccines and, more importantly, strains national health systems. “.
Economists predict that Omicron could slow growth this quarter and early 2022, but the impact will not be a contraction.
“It turns a boom into a boomlet,” said Diane Swonk, chief economist at the accounting firm and consultant Grant Thornton LLP. “We have a lot of momentum and that helps.”
For its part, Oxford Economics is likely to project world GDP growth of 4.2% next year, slightly less than its previous estimate of 4.5%.