California’s small businesses waded through COVID to a rebound in consumer spending, only to face rising costs for supplies and wages.
But some economists argue that Omicron could have the opposite effect: If the variant leads to lockdowns or scares consumers into staying home, economic activity could slow, and with it, the surging demand that has overwhelmed supply chains and driven up consumer prices. The worst-case scenario would see the economy decelerate without providing relief from already built-in inflation.
The yield on the two-year Treasury slumped to 0.63% from 0.66% late Friday. That’s a sharp turnaround from its strong rise over recent months, built on expectations the Fed may begin raising short-term interest rates in 2022 to quell inflation.Given high inflation that has lasted longer than expected, the Fed last week targeted an earlier end for its program to buy billions of dollars of bonds each month, which is meant to keep long-term interest rates low.