The emergence of the Omicron coronavirus variant poses risks related to growing inflation concerns, supply chain bottlenecks and a recovering labor market, Federal Reserve Chairman Jerome Powell said Monday.

Powell expects the new variant to intensify inflation concerns while also holding back workers as the labor market recovers, leading to accelerated wage growth and increased supply chain issues, the Federal Reserve chairman testified before the Senate Banking Committee.

“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”

Powell added that inflation, which increased to its highest level in 30 years in October, is “well above” the Federal Reserve’s 2% “longer-run goal.” Additionally, he said that supply chain issues have made it more difficult for producers to meet strong demand while surging energy and rent prices have pushed inflation higher.

Additionally, forecasters “continue to expect that inflation will move down significantly over the next year as supply and demand imbalances abate,” Powell said.

Powell acknowledged the improving labor market, which saw slack diminish in recent months while wages continue rising at a “brisk pace.”

Jobless claims decreased to 199,000 in the week ending on Nov. 20, falling 71,000 compared to the previous week and marking the lowest figure in 52 years.

Meanwhile, U.S. employers are expected to add over half a million jobs for the second consecutive month in November when the Labor Department releases its jobs report on Dec. 3, The Wall Street Journal reported.

Powell and Treasury Secretary Janet Yellen are scheduled to appear before the Senate Banking Committee on Nov. 30.

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