Federal Reserve Chairman Jerome PowellConsiders that Covid-19’s omicron version and an increase in coronavirus cases are a danger to the U.S. and could muddle an uncertain inflation outlook.

Powell spoke to Senate members Tuesday in remarks that he said: “The recent spike in COVID-19 and Omicron variants pose downside risk to employment, economic activity, and increased uncertainty about inflation.” The virus’s emergence could lead to people being less willing to work, which will slow the progress of the labor market. It also increases supply chain disruptions.

Treasury Secretary Janet YellenPowell joins Powell in Tuesday’s Inaugural testifying before the Senate Banking Committee. Each quarter, both the Fed chief executive and Treasury secretary must report to Congress as part of March 2020 economic relief legislation. The law magnified central banks’ emergency lending programs.

On Monday, the central bank published Powell’s remarkets.

In addition to a more direct comment on inflation by the Fed Chief, he said that while it was difficult to predict how supply constraints will persist and affect it, it appears now that factors pushing up inflation upwards will continue well into next year.

He mentioned that several forecasters, including many at the Fed predict that inflation will fall “significantly” in the coming year, as bulked-up supply channels overtake the cooling demand for goods.

Powell made the remarks just days after investors were frightened by a new Covid version. Investors began to abandon U.S. stocks, and they lowered their expectations of future Fed rate increases. The Dow Jones Industrial Average lost 900 points (or 2.5%) on Friday. clinched its worst session of yearOn the final trading day of the week. The markets rebounded a little on Monday.

Besorginism about possible spread and impact the omicron coronavirus variantOn Friday, traders flocked to Treasury bonds for their relative safety and reduced the likelihood of future Fed rate increases.

A quarter of the investors last week believed that the Fed will still maintain low interest rates in June 2022. According to CME Group’s FedWatch tool, 75% of them thought the central would hike at least once. This spread has narrowed partly due to the new variant. Some 35% now bet that the Fed would still have rates at or near zero in June 2022.

On Friday, the yield of the 10-year Treasury benchmark note dropped 15 basis points to 1.49%. However, it rebounded above 1.5% Monday. The price of bonds rises, and so do bond yields.