By Lindsay (NYSE:) Dunsmuir

(Reuters.) – U.S. lawmakers will question the Treasury Department and Federal Reserve chiefs Tuesday about stubbornly high inflation and the potential impact of Omicron COVID-19, a new variant of Omicron COVID-19. Both officials consider the economy strong.

The testimony of Fed Chair Jerome Powell (1000 GMT) and Treasury Secretary Janet Yellen will be before the U.S. Senate Banking Committee. They are expected to speak at 10:00 EST (10 a.m. EST) about the economic recovery following the COVID-19 pandemic. On Wednesday, they will appear before the House of Representatives Financial Services Committee.

Late Monday saw both Powell and McConnell release their prepared testimony. Powell projects 5% growth, while McConnell notes that the new version poses upside risks for economic activity and increases uncertainty about inflation.

Yellen warned legislators that failure to resolve the debt limit will “eviscerate” the recovery.

Inflation at its highest level in 31 years and Fed’s preferred measurement of price pressures greater than twice its goal of 2%, it is now possible for the U.S. central banks to abandon its promise to hold its benchmark overnight rate below zero until the market has fully recovered.

The U.S. has 4.6% unemployment and nearly five million less people than before the pandemic.

Fed started to lower its support to the economy this month and currently is on track for fully tapering its $120 million monthly purchase of Treasuries. This program was created in order to support the economy during the current pandemic.

With costs of everyday items like food, gas and rent rising quickly, Fed officials have indicated they could speed up the pace of the taper to give more scope for an earlier interest rate lift-off next year if required, according to the minutes https://www.reuters.com/markets/us/with-feds-powell-renominated-focus-turns-speed-bond-buying-taper-2021-11-24 of the central bank’s last policy meeting published last week. This topic will be discussed at the Fed’s December 14-15 policy meeting.

These comments, along with other statements from officials recently have led analysts to increase their bets that Fed may raise rates as soon as mid-2022.

In a note sent to clients by Goldman Sachs, (NYSE:), Goldman Sachs stated that there was “a substantial risk” that the timeframe for tapering the central bank’s asset purchases would be accelerated.

Powell didn’t mention taper in his prepared remarks, but his comments about this variant indicate that he is concerned both about slowing the economy and further inflation pressure. This would make it difficult for Fed policy to shift in the opposite direction.

Sam Bullard, senior economist at, stated that the new COVID variant “could complicate any plans for acceleration of the taper at December meeting,” which was the direction momentum had been heading before the variant discovery.” Wells Fargo (NYSE:).

NEW VARIANT

Officials from the health sector are trying to figure out how deadly and transmissible this new strain is, and whether current vaccines can be used to protect against it. A travel ban has been implemented by the United States for some countries from southern Africa affected by this strain.

Inflation has been slowed by the now dominant Delta form of COVID-19.

Powell prepared his remarks and stated that although it was difficult to forecast the persistence or effects of supply constraint, factors driving inflation up will persist well into next years.

The recent increase in COVID-19-related cases, and the subsequent emergence of Omicron, raised concerns. He said that this could reduce the willingness to work in real life, slowing progress in labor markets and intensifying supply-chain disruptions.