Jerome Powell

He adds that the new variant could also worsen supply chain disruptions.

A large deficit will make it harder for Congress to cut taxes or boost spending when the next recession hits, Powell said.

The Fed cut short-term rates last month for the third time this year, to a range of 1.5% to 1.75%.

He says the outlook for the U.S. economy remains favorable but that it continues to face risks.

The Fed chairman said the central bank is monitoring potential vulnerabilities in the banking system to ensure its continued stability.