Editorial | Decisive action has to be taken by the Fed as coronavirus’ Omicron variant strikes
- As the US central bank considers how much support it can give the country’s economy, the world seeks real and sustainable growth, not an artificial stopgap
The US Federal Reserve is supposed to worry only about monetary policy. Now it has to dabble in epidemiology as well. Jay Powell’s bad call on inflation being “transitory”, it turns out, didn’t affect his reappointment as chairman of the US Fed.
As major economies loosen restrictions on travel and open up for business, the Fed looks set to taper – accelerating the unwinding of the crisis-era stimulus – and to start raising interest rates next year. Then, the Omicron variant strikes.
Here’s the problem. Depending on its severity and spread, the new variant may have a serious impact on global economic recovery. At least 17 countries have already detected its presence. Many now rush to reimpose travel restrictions. The World Health Organization has warned the variant could fuel further Covid-19 surges, with possible “severe consequences”.
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Asia tightens borders as spread of new coronavirus variant Omicron clouds region’s return to travel
While there is some evidence that the Omicron strain may be more contagious, it is also less lethal. But given the never-ending emergence of new variants, Powell and his fellow honchos at the Fed must decide how much support to show for the US economy and how tough they need to be over inflation going forward.