Stocks took a major hit yesterday as fears over the recently discovered Omicron coronavirus variant brewed. Federal Reserve Chair Jerome Powell also shared before Senate that he no longer believes inflation is "transitory," noting new factors—like Omicron—could mean high inflation will stick around well into next year.
Growing concerns about Omicron may slow economic recovery, similar to when the delta variant surged. "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 in his testimony. "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."
According to an economic outlook released today by the OECD (Organisation for Economic Cooperation and Development), inflation poses one of the largest risks to the global economy. The OECD changed its original forecast for U.S. economic growth from 6.0% to 5.6% this year, 3.9% to 3.7% in 2022 and 2.4% in 2023.
"The main risk… is that inflation continues to surprise on the upside, forcing the major central banks to tighten monetary policy earlier and to a greater extent than projected," the OECD told Reuters.
Stocks recovered some today as stockholders are still trying to understand the severity of the new coronavirus variant.