REUTERS NEXT-Omicron Could Be “Significant” Threat to Global Economy, Yellen Says
Band Alessandra Galloni
December 2 (Reuters) – The Omicron variant of COVID-19 could slow global economic growth by exacerbating supply chain problems and lowering demand, U.S. Treasury Secretary Janet Yellen told the Reuters Next conference on Thursday.
Yellen spoke of great uncertainty about the impact of the highly contagious variant, first detected in South Africa, given the severe U.S. economic downturn caused by the emergence of the Delta variant of COVID-19 earlier this year.
“I hope it’s not something that will slow economic growth significantly,” Yellen said, adding: “There is a lot of uncertainty, but it could cause significant problems. evaluating this. “
Yellen said the new strain of the coronavirus could exacerbate supply chain problems and spur inflation, but it could also lower demand and slow growth, which would ease some of the inflationary pressures.
The spread of Omicron has shaken financial markets and prompted governments around the world to tighten restrictions on travel and the workplace. United States reported his first case of community transmission of the new variant Thursday.
Yellen, the former head of the Federal Reserve, also said the virtual world conference that it is ready to withdraw the word “transitional” to describe the current state of inflation which plagues the US recovery after the COVID-19 pandemic, echoed comments from Fed Chairman Jerome Powell earlier this week.
“I am ready to take the word transient out. I can agree that this has not been an appropriate description of what we are dealing with,” Yellen said.
Powell told lawmakers this week that the word meant different things to different people, causing some confusion, and that now is a good time to explain more clearly what it means.
Yellen insisted that the Biden administration’s stimulus spending earlier this year was not the main driver of the rise in consumer prices, which peaked in 31 years in October and are now more. double the Fed’s flexible inflation target of 2% per year. She blamed the price hike mainly on supply chain issues and a mismatch between supply and demand.
Yellen said the $ 1.9 trillion US bailout passed by Congress earlier this year helped vulnerable Americans weather the worst of the pandemic and fueled the strong US economy.
While this may have contributed “somewhat” to inflation, she said the surge was largely due to the pandemic and the massive shift in consumption towards goods and away from services.
She said the Fed should watch wage increases closely to avoid the kind of damaging and lasting “wage-price spiral” we saw in the 1970s.
Yellen, who led the Fed from 2014 to 2018, said it was up to the US central bank to decide what to do about interest rates, but noted that a strong US economy, which would likely lead to hikes of rate, is generally a good thing for the rest of the world.
President Joe Biden’s administration is working closely with the private sector to curb price increases, Yellen said, citing efforts to speed up container loading at ports and encourage domestic production of semiconductors.
She said to lower Trump-era tariffs on goods imported from China thanks to revived exclusion process could help alleviate some inflationary pressures, but would not be a “game changer”. [nL1N2SN1M6]
WAlthough she was “open” to a visit to China to meet with government officials on economic issues, Yellen said a trip was not currently on her agenda. But she said she would continue to engage with her Chinese counterpart, Vice Premier Liu He, on issues such as technological practices, securities markets and exchange rate practices as well as efforts. aimed at rebalancing the Chinese economy towards consumer spending.
Yesellen also told the Reuters Next audience that his decision is not yet made on whether the Fed should create a digital dollar, following China and some other countries in the development of central bank digital currencies.
She said the pros and cons of such a move had to be weighed, including possible negative effects on the banking system, and that a consensus between the Fed, the Biden administration and Congress was needed to proceed.
(Reporting by Alessandra Galloni, additional reporting by David Lawder, Andrea Shalal and Daniel Burns; Editing by Paul Simao)
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