The US central bank believes that the Omicron variant may reinforce the price hike in the coming weeks and worsen inflation.
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Jerome Powell on November 22, 2021 in Washington.
U.S. Central Bank (Fed) officials have said there may be grounds for raising interest rates sooner than expected, especially if Omicron bolsters price hikes, according to the minutes of the latest monetary meeting, released. Wednesday.
“Most of the participants noted that (…) it might become justified to raise key rates earlier or at a faster rate than (they) had previously expected,” indicate the minutes of the 14 meeting. and December 15. The adjective “transitory”, used by Fed officials to qualify inflation since the onset of the crisis, had been withdrawn from the official statement and the Fed had increased its inflation projections.
The risks associated with the new variants had been taken into account, due to the appearance of Omicron a little more than two weeks before the meeting, and its very rapid progression. “The risks to the economic outlook remain, especially due to new variants of the virus,” they said, according to the report.
Full employment
And it could even worsen inflation, says the Central Bank citing “rising housing costs and rents, more widespread wage growth driven by labor shortages and prolonged global tensions on the part of the United States. ‘supply, which could be exacerbated by the emergence of the Omicron variant ”.
“Participants generally expect bottlenecks in the global supply chain to persist until at least next year,” the report added. In addition, “a number of participants felt that a substantial improvement in labor market participation would take longer than expected”.
The Fed has said it wants to keep rates low until the labor market returns to a level corresponding to full employment, but “some participants” “pointed out that there could be circumstances in which it would be appropriate »To meet them before achieving it.
During this meeting, the Fed announced that it would move up a gear by bringing forward by a few months the end of the reduction in asset purchases (“tapering”), a precondition for the hike in key rates, and paved the way to three increases in 2022. When purchases will be reduced to zero, “there should be no need (…) for a long time” before the first rate hike, commented the president of the institution Jerome Powell, during the press conference following this meeting.