According to the head of the bank, Loretta Mester, if the new version of the coronavirus turns out to be more dangerous than previous strains, this may strengthen the trend towards higher prices.
The spread of the Omicron strain of coronavirus threatens to provoke a rapid increase in inflation in the United States, which will lead to further disruptions in supply chains and labor shortages. This warning was issued by the head of the Federal Reserve Bank of Cleveland (Ohio) Loretta Mester in an interview published on Friday with the Financial Times newspaper.
According to her, if Omicron turns out to be more dangerous than the previous strains, “this may strengthen the upward trend in prices that we have encountered due to supply chain problems.” “The fear of the virus is still one of the factors that keep people from returning to work,” said the head of one of the 12 banks that unites the U.S. Federal Reserve System (FRS).
Fed Chairman Jerome Powell has repeatedly expressed the opinion that the price hikes in the United States will stop in the near future, and the inflation rate will decrease to a steady one. In his opinion, the growth mainly reflects temporary problems in supply chains and a sharp decline in prices at the beginning of the coronavirus pandemic last spring, which is why the inflation rate now looks much higher than a year ago.
A report circulated last week on the November 2-3 meeting of the Fed’s open market steering committee said it was ready to raise the benchmark interest rate if inflation in the United States continues to rise. The Fed confirmed the “patient approach” to the data that inflation in the United States is rising at the fastest pace in the last 30 years. Nevertheless, the meeting participants stated that “they will not hesitate to take appropriate measures to eliminate inflationary pressures that pose a risk to the long-term goal of ensuring price stability and employment.”