If the omicron wave of the COVID-19 pandemic dissipates quickly, economic activity will likely strengthen rapidly and economic growth will be robust in 2022, according to members of the Federal Open Market Committee. In minutes from the group’s Jan. 25-26 meeting released today, members remarked that strong household balance sheets, rising wages and effective adaptation to the pandemic by the business sector were factors supporting the outlook for strong growth this year.
However, some members noted that there was a risk that additional variants could weigh on economic activity this year. Members also expressed concern that their contacts expected that ongoing labor shortages and other supply constraints would persist well after the acute effects of the omicron wave had waned.
Participants said risks to the outlook for the economy include China’s zero-tolerance COVID-19 policy potentially further disrupting supply chains, the possibility of geopolitical turmoil that could cause increases in global energy prices or exacerbate global supply shortages, a worsening of the pandemic, persistent real wage growth in excess of productivity growth that could trigger inflationary wage and price dynamics or the possibility that longer-term inflation expectations could become unanchored.