U.S. economy can withstand Fed tightening, Omicron surge, Powell says

• Federal Reserve Chair Jerome Powell said on Tuesday the economy should weather the current COVID-19 surge with only "short-lived" impacts and was ready for the start of tighter monetary policy. 
• The Fed chief said the central bank was determined to ensure that high inflation did not become entrenched and that far from diminishing job growth, a turn to higher policy interest rates and runoff of its asset holdings was necessary to keep the current economic expansion underway. 
• If prices continue spiking, the Fed could be forced to push through a sharper rise in interest rates this year than the three quarter-percentage-point hikes its policymakers currently anticipate, risking a return to recession. 
• Powell noted that inflation is running very far above target and that the economy no longer needs or wants the very accommodative policies that have been in place. He further noted that with the Fed's benchmark overnight interest rate near zero and nearly $9.0Tn in assets on its books, it is a long road to anything close to restrictive policy, Powell said. 
• Powell has said that in the meantime, Fed actions should not have negative effects on the labour market, noting that focus needs to be placed on getting inflation under control because maximum employment will not be obtained without price stability.

(Source: Reuters)