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New Omicron Variant May Cause Inflation Troubles to Extend into 2022
As world leaders and public health officials rush to get the omicron variant under control, financial experts expect the new mutation of the COVID-19 virus may push inflation issues well into the new year.
Inflation issues have been a concern since the onset of the COVID-19 pandemic, and Federal Reserve Chairman Jerome Powell told the U.S. Senate Banking Committee that he foresees inflation persisting well into 2022 due to wage increases and staff shortages.
Restaurant Business Online said the announcement comes after previous predictions that inflation would slow down as the pandemic improves. However, the news of the new variant caused stocks to drop on Wall Street. The outlet reported that the drop on Wall Street had the biggest impact on restaurants, an industry that saw a median 2% drop.
“It now appears that factors pushing inflation upward will linger well into next year,” Powell said in a statement. “In addition, with the rapid improvement in the labor market, slack is diminishing and wages are rising at a brisk pace.”
Additionally, health officials are working to determine the effectiveness of the vaccines against the new variant. Dependent upon those results, financial forecasters expect that some employees may be wary of returning to work until more is known, thus posing a risk to rising inflation and prolonged economic recovery.
“The recent rise in COVID-19 cases and the emergence of the omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply chain disruptions.”
Such concerns about inflation and supply chain issues following the outbreak of the new omicron variant were shared by the Organisation for Economic Co-operation and Development’s Chief Economist Laurence Boone.
The Financial Times reported that global monetary policymakers are encouraging caution as inflation forecasts increase. Inflation forecasts from the G20 rose from 3.9% in September 2021 to 4.4% in December 2021.
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