The latest Omicron variant could worsen supply chain snags and squash demand, slowing overall economic growth, Treasury Secretary Janet Yellen said at the Reuters Next conference on December 1, at which she addressed an assortment of economic issues.
The highly contagious variant has caused much uncertainty, she said, comparing it to the Delta variant’s impact on the U.S. economy in early 2022.
Omicron’s spread has disrupted financial markets and caused the tightening of travel and workplace restrictions around the globe. In early December, the U.S. reported its first case of community spread of the new variant.
Also, Yellen characterized the persistent pandemic-inspired inflation in a new way. "I'm ready to retire the word transitory. I can agree that that hasn't been an apt description of what we're dealing with," she said.
She also made clear that inflation is not the result of the Biden administration’s $1.9 trillion stimulus spending, but rather of global supply chain issues and subsequent supply and demand discrepancies, as well as consumers’ shift away from services to goods during the pandemic. The American Rescue Plan passed by Congress, she said, fueled the U.S. economy and helped families endure the worst stages of the crisis.
Yellen, who led the Federal Reserve from 2014 to 2018, said that a strong U.S. economy could hike interest rates but was good for the rest of the world, generally.
As for China, Yellen said that lowering Trump-era tariffs on imports through an exclusion process could lessen some inflationary pressures but would not be a “game-changer.” And, she would consider a visit to China, she said, to discuss economic issues while continuing to engage with her Chinese counterpart, Vice Premier Liu He, on issues such as technology practices, securities markets, and exchange rate practices. No such plans for a visit are on her calendar at the moment, however.