Yellen says Omicron could pose a “serious” threat to the global economy

(Reuters) – U.S. Treasury Secretary Janet Yellen said at the upcoming Reuters conference on Thursday that the Omicron version of COVID-19 could slow global economic growth by exacerbating supply chain problems and reducing demand.

Yellen cited significant uncertainty about the impact of the highly contagious variant, which was first detected in South Africa, given the severe economic slowdown in the United States caused by the emergence of the delta variant of COVID-19 earlier this year.

“Hopefully, this doesn’t slow economic growth too much,” Yellen said. “There’s a lot of uncertainty, but it could cause major problems. We’re still assessing that.”

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Yellen said the new strain of coronavirus could exacerbate supply chain problems and increase inflation, but it could also lead to lower demand and slower growth, which could ease some inflationary pressures.

The spread of Omicron has disrupted financial markets and prompted governments around the world to tighten travel and workplace restrictions. United State I mentioned the first Status of community transmission of the new variant on Thursday.

As Yellen, the former chair of the Federal Reserve, told the virtual global conference that she was ready to retire from the word “temporary” to describe the current state of inflation plaguing the United States in recovery from the COVID-19 pandemic, Echoing comments From Federal Reserve Chair Jerome Powell earlier this week.

“I’m ready to retire from using the word transitional,” Yellen said. “I can agree that’s not an adequate description of what we’re dealing with.”

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

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Treasury Secretary Janet Yellen pauses while testifying before a mixed Senate Banking Committee hearing on oversight of the Treasury and Federal Reserve on Capitol Hill in Washington, United States, November 30, 2021. REUTERS/Elizabeth Frantz

Yellen insisted that stimulus spending by the Biden administration early this year was not the main driver of boosting consumer prices, which reached 31-year highs in October and are running at more than double the Fed’s flexible inflation target of 2% annually. She blamed the price hikes mainly on supply chain issues and a mismatch between supply and demand.

Yellen said the $1.9 trillion US rescue plan passed by Congress earlier this year has helped vulnerable Americans weather the worst of the pandemic and fueled the strong US economy.

While it may have contributed to inflation “to some extent,” she said the increase was largely due to the pandemic and a massive shift in consumption toward goods and away from services.

She said the Federal Reserve should keep a close eye on wage rises to avoid the kind of perverse and protracted “wage price spiral” seen in the 1970s.

Yellen, who led the Federal Reserve 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 higher rates, was a good thing. In general the rest of the world. Read more

Yellen said the administration of President Joe Biden is working closely with the private sector to curb price hikes, citing efforts to speed up container loading at ports and encourage domestic production of semiconductors.

She said that reducing tariffs under Trump on goods imported from China by reviving the exclusion process It can help relieve some inflationary pressures, but it will not be a “change agent”. [nL1N2SN1M6]

While she is “open” to visiting China to meet with government officials there on economic issues, Yellen said the trip is 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 technology practices, stock markets and exchange rate practices as well as efforts to rebalance the Chinese economy toward consumer spending.

As Yellen told the following Reuters audience, Her mind is not made up yet On whether the Federal Reserve should create a digital dollar, following China and some other countries in developing central bank digital currencies.

She said the advantages and disadvantages of such a move need to be weighed, including the potential negative effects on the banking system, and that consensus between the Federal Reserve, the Biden administration and Congress is essential moving forward. Read more

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(Reporting by Alessandra Galloni), additional reporting by David Lauder, Andrea Shalal and Daniel Burns; Edited by Paul Simao

Our criteria: Thomson Reuters Trust Principles.

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