Federal Reserve Chairman Jerome Powell said in a news conference on July 28 that he doesn’t see the Delta variant of the CCP virus as a major threat to the U.S. economy.
“What we’ve seen is with successive waves of COVID over the past year and some months now, there has tended to be less in the way of economic implications from each wave,” Powell said at a news conference.”We will see whether that is the case with the Delta variety, but it’s certainly not an unreasonable expectation.”
When the pandemic hit the U.S. last year, the Federal Reserve dropped its benchmark interest rate to zero and committed to purchasing $120 billion in bonds every month in a bid to prop up the economy. Powel made no change to either policy on July 28, but said that the United States is moving closer to the “substantial further progress” that the U.S. central bank wants to see before tapering the monthly bond purchases.
The Fed isn’t expected to lift the benchmark borrowing rate until its bond purchasing is reduced to zero.
Powell said that if the Delta variant continues to spread, some consumers might pull back on purchases that have driven the recent economic recovery.
“Dining out, traveling, some schools might not reopen,” he said. “We may see economic effects from some of that, or it might weigh on the return to the labor market. We don’t have a strong sense of how that will work out, so we’ll be monitoring it carefully.”
But Powell noted that last summer’s wave of infections had inflicted less damage to the economy than many analysts had forecast.
“We’ve kind of learned to live with it, a lot of industries have kind of improvised their way around it,” Powell said. “It seems like we’ve learned to handle this.”
The statement the Fed issued after its latest policy meeting said that ongoing vaccinations were helping to support the economy. But it dropped a sentence it had included after its previous meeting that said those vaccinations have reduced the spread of COVID-19.
Powell’s news conference took place amid widespread concern about inflation. Consumer prices jumped 5.4 percent in June from a year ago—the biggest increase in 13 years. And a separate inflation gauge the Fed prefers has risen 3.9 percent in the past year.
Powell noted that the price index increases have been driven largely by a narrow set of product categories, including used cars, airline tickets, hotel rooms, and car rentals. Those industries, the Fed chairman said, were distorted by the pandemic and the speedy reopening of the country over the past several months.
Powell said the Fed’s most important inflation measure is what consumers expect the inflation to be in the coming months. That indicator has not gone up significantly, Powell said.
The Associated Press contributed to this report.