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Federal Reserve Chairman Powell:
Photo: KEVIN DIETSCH / POOL / EPA-EFE / Shutterstock
Many economists have bet on an economic recovery from the corona crisis in the coming months.
But now there is a new factor of uncertainty.
The head of the US Federal Reserve, Jerome Powell, sees risks for the economy in the Omikron variant.
"The recent increase in Covid-19 cases and the appearance of the Omikron variant bring risks for the labor market and the economic recovery as well as increased uncertainty with regard to inflation," Powell said in a statement before his appearance before a banking committee of the US Senate.
Rising concerns about the virus could reduce people's willingness to work, which could ultimately exacerbate supply chain problems in many parts of the economy.
“It is difficult to predict the duration and impact of the supply bottlenecks.
But it now appears that factors driving inflation will persist for the next year, ”Powell said.
US inflation is higher than it has been in three decades.
Powell promised that the US Federal Reserve would stand by its price stability target.
The central bank will support the economy and the labor market and prevent a price spiral.
In view of the advancing economic recovery from the corona crisis, the Fed had only announced in early November that it would reduce its economic asset purchases by $ 15 billion to the current volume of $ 120 billion per month.
With the program, the Fed is pumping additional money into the financial markets to keep lending rates low and stimulate the economy.
If the new virus variant poses a threat to the ongoing economic recovery and extends the pandemic in perspective, the Fed could possibly rethink its tapering course - i.e. reducing bond purchases, explained analyst Jochen Stanzl from broker CMC Markets.
The ECB is very relaxed
The massive inflation is not only a problem in the USA.
In Germany, high prices for refueling and heating drove the German inflation rate above the five percent mark in November for the first time in almost 30 years.
In October the inflation rate was 4.5 percent, in September it was 4.1 percent.
While the European Central Bank (ECB) has reached its peak and therefore sees no reason for interest rates to rise rapidly, some economists are warning of a sustained high price level due to the extremely loose monetary policy.
They fear a spiral of sharply rising prices and wages that could solidify inflation.
According to Commerzbank chief economist Jörg Krämer, "prices are now increasing on a broader front, it is no longer just about energy and some goods particularly affected by Corona."
Because of the high budget deficits in the euro countries and the bond purchases by the ECB, too much money continues to circulate.
"The ECB should take its foot off the gas, stop its bond purchases and end the negative interest rate policy," demanded Krämer.
ECB director Isabel Schnabel, on the other hand, does not see any reason for a quick change of course in monetary policy.
The number was "now expected before its size," she said on Monday evening on ZDF.
"But all in all, our earlier forecasts did not anticipate such a sharp rise in inflation," she admitted.
Schnabel expects lower values again in the future.
“We assume that inflation will peak in November,” she said.
The rate of inflation is likely to gradually decline again towards two percent in 2022, the ECB's target.
The ECB will react decisively if inflation should persist at a level higher than two percent.
"But at the moment it would be a mistake to raise interest rates early and thus slow the upswing, because that would essentially lead to increased unemployment and would not be able to change anything about the current very, very high inflation," said Beak.
mmq / Reuters / dpa