Original title: the Delta epidemic is coming, and Powell is betting that the US economy will not get into a quagmire again.

The idea that the economy has "learned to deal" with novel coronavirus and will not be bogged down by a new epidemic or rising inflation is likely to be challenged in the coming weeks as schools resume classes, supply chains are still stuck and federal unemployment benefits are winding down.

The data released on Thursday (July 29) show the risks ahead as the United States faces a transition period from relying on federal bailouts last year to an economy whose emergency bailout plan expires and is taken over by private sector income.

Us economic output returned to pre-epidemic levels in the second quarter and rebounded earlier than many expected, according to GDP data released by the Commerce Department on Thursday. But the report also showed that personal income fell as federal transfer payments fell, with GDP growing at an annualised rate of 6.5 per cent in the second quarter, slightly below the Fed's forecast of 7 per cent growth.

Large-scale stimulus packages, unemployment benefits and other payments led to a "better-than-expected performance" during the sharp rise in the epidemic last summer.

Powell presented this example on Wednesday (July 28), saying that the impact of each epidemic on the economy is gradually diminishing.

Government spending is disappearing at a time when heightened concerns about the spread of the Delta variant have raised new warnings about growth prospects in the United States.

Although GDP in the second quarter was slightly lower than expected, the Delta virus posed a "significant downside risk," said Lydia Boussour, chief US economist at the Oxford Institute for Economics, who said she still expected full-year economic growth of 7 per cent as consumers continued to spend as supply chain problems eased and goods hit shelves.

"We still expect the economy to maintain strong momentum," she wrote in a report. "

By contrast, Paul Ashworth, chief North American economist at Capital Macro, paints a bleak economic picture. In this picture, the Delta variant becomes a drag, with rising prices weakening the purchasing power of households. The core personal consumption expenditure (PCE) price index, a measure of inflation in Thursday's GDP report, surged 6.1% in the second quarter, the highest level since the early 1980s, when the Fed struggled with entrenched price increases.

"as the impact of fiscal stimulus weakens and soaring prices weaken purchasing power, the Delta variant is rampant in the south" and economic growth is likely to slow to just 3.5 per cent in the second half of this year, Ashworth said.

At a press conference after Wednesday's policy meeting, Powell made a straightforward assessment of the threat to the economy caused by the epidemic. The US economic recovery appears to be on track, the impact of the virus on the economy continues to weaken and the economy is making progress towards a possible reduction of some of the Fed's emergency stimulus measures, Fed policy makers said in a policy statement.

Like earlier adjustments, the Fed's actions this week continue to show that there is still a steady disconnect between the current epidemic and the economic outlook.

Epidemiologists have long warned that novel coronavirus will not disappear-in a country with high doubts about vaccines, achieving mass immunization is a difficult goal to achieve-but will be part of the social and economic context for the next few years.

The Fed seems to have adopted this view in a series of subsequent actions. Since April, the Fed has no longer seen the epidemic as a drag on the economy, but has emphasized the role of vaccination. In fact, the Fed said this week that novel coronavirus will still be a future risk, but not a major risk.

"to some extent, we have learned to live with it," Powell told reporters. " Although the Delta strain has overcrowded hospitals in some parts of the United States, "A significant proportion of people across the country have been vaccinated, and the vaccine is clearly effective." the impact may be smaller. There may not be a major blockade or anything like that. "

Whether this situation will continue will be known in late summer and autumn. Some companies have delayed plans to get employees back to the office, and the day when weekday traffic at downtown retail stores and restaurants can be restored is likely to be pushed back again and again.

Powell acknowledged that the surge in Delta cases could complicate the situation, at least for a while, if the school district delays the reopening of face-to-face courses, or if workers forced to take time off wait a few more weeks to return to work. But for now, the epidemic will not undermine the Fed's plan without a significant deterioration in the economic outlook

The Fed expects continued job growth and also needs to manage the risk of rising inflation.

Diane Swonk, chief analyst at Grant Thornton, called Powell's comments this week "recalcitrant optimism" and listed the risks he outlined for the future, including Delta mutants and the slow progress of millions of unemployed people in finding new jobs.

The renewed surge in infections "has delayed some companies returning to offices until later this year," Swonk wrote. "as Powell pointed out, we are getting used to spending during the epidemic. These spending are supported by fiscal stimulus. As we enter 2022, support will weaken. "