Powell: "Impact of Delta Variant on Economy Unclear"

Indication of Blocking Potential Monetary Policy Changes Due to Delta Variant Spread
Possible Tapering Signals in Tomorrow's FOMC Minutes and Next Week's Jackson Hole Meeting

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Jerome Powell, Chairman of the Federal Reserve (Fed), assessed that it is unclear whether the spread of the Delta variant of COVID-19 will impact the economy.

On the 17th (local time), during a virtual town hall meeting with teachers in Washington DC, Chairman Powell explained, "We are still living with COVID-19, and this way of life will continue for some time," adding, "People and businesses have learned how to adapt to living with COVID-19."

He continued, "The pandemic still casts a shadow over economic activity, and while we cannot yet declare victory, many companies are continuing their operations by applying new business models," he evaluated.

A major foreign news outlet analyzed that Chairman Powell indicated that despite the spread of the Delta variant and delays in vaccination, the Fed’s stance that the U.S. economic recovery is on track remains intact.

In his opening remarks, Powell noted that COVID-19 has especially dealt a heavy blow to American students and educators, stating, "It forces us to think more quickly about what is important in life," and expressed his belief that "an extraordinary generation will be created in extraordinary times."

This was an encouragement that the new generation, having experienced the COVID-19 situation, can grow and achieve results not seen before.

The market expected that Powell would refrain from mentioning monetary policy during his speech and Q&A session ahead of the Jackson Hole meeting.

Experts believe that Powell is likely to withhold announcing a decision on tapering asset purchases at the Jackson Hole meeting and instead make a concrete conclusion at the September Federal Open Market Committee (FOMC) meeting.

The minutes of the July FOMC meeting, to be released on the 18th, could also provide an opportunity to understand the Fed officials’ specific opinions on tapering.

The July retail sales released that day showed a 1.1% decrease compared to the previous month, suggesting the possibility of an economic slowdown.

Due to the weak retail sales, major indices on the New York Stock Exchange were all falling by nearly 1%.

Concerns over the Afghanistan situation and a slowdown in the Chinese economy were reflected, leading to a preference for safe-haven assets and a sharp rise in the value of the U.S. dollar.

On that day, the dollar index surged 0.56% to 93.142, reaching its highest level since the end of March.

As the dollar value rose, gold and international crude oil prices declined.