Over the next 12 months, policy decisions in Washington — at the central bank and the White House, on Capitol Hill and at the independent regulatory agencies — could dramatically shift the course of the U.S. economy for years to come. At the same time, the Omicron variant has pushed Covid infections to new highs and clouded the outlook for 2022. Here are the big questions for the economy that we’ll be watching at MM: Can the Fed pull off its hawkish pivot? Chair Jerome Powell moved quickly at the end of 2021 to accelerate the Fed’s tapering of asset purchases amid worrisome inflation data. Officials also penciled in three rate increases this year, and Powell said they began discussions at their last meeting about the process for shrinking the Fed’s balance sheet. (Look for more details Wednesday when the Fed releases minutes from its last policy meeting.) Powell emphasized that the Fed could take things faster or slower, depending on how hard Omicron hits the economy. But it’s a delicate balancing act – move too soon or too quickly, and the Fed could cut off the expansion before millions of Americans have returned to work. Wait too long, and inflation could become entrenched – a risk that has increased in recent months, Powell said in December. When will inflation begin to ease? Policy makers expect prices will remain elevated through the middle of this year, as tangled supply chains continue to unwind. But Omicron could lead to new logistical snarls around the globe, putting upward pressure on prices. The question is hugely consequential for Democrats this year, as inflation feeds into voters’ concerns about the economy before the midterm elections in November. Expect progressives, and some in the administration, to lean more heavily on big companies to keep prices in check. The White House will update its inflation expectations when the president’s budget is released, likely next month. Can Democrats get Build Back Better over the finish line? The next few months are make-or-break for President Joe Biden’s sweeping social policy agenda, and Democrats will probably have to settle for a smaller version than they originally hoped if they want to bring along holdout Sen. Joe Manchin (D-W.Va.). If their efforts fall short, Wall Street forecasters expect growth will be somewhat slower than previously expected this year as the expiration of the expanded child tax credit dents consumer spending. The much bigger impact of the legislation would be realized over the next decade, as the government boosted spending on child care, education and green energy investments, and ramped up tax collection. How big is the Omicron fallout? The virus is still the biggest unknown for the economy. Previous waves have prompted consumers to pull back on spending on in-person services, such as dining out and travel, strained businesses as workers called in sick or stayed home to care for family members, and fueled global supply chain woes. But the magnitude of those effects have proven difficult for economists to judge. “If there is one thing that we have learned this year, it is that the US economy has proven to be resilient in the face of pandemic-related challenges,” Deutsche Bank economists said last week. Who will take charge of Biden’s regulatory agenda? The independent regulators will be best-positioned to advance some of the White House’s most important policy goals this year. The only problem: Many of them aren’t yet in place. Biden is expected to finally name his pick to be the Fed’s top bank supervisor as soon as this week, but has stumbled in his effort to name a comptroller of the currency and hasn’t nominated anyone to fill vacancies at the FDIC, which now has another key opening after Trump-appointed Chairman Jelena McWilliams resigned last week. IT’S MONDAY — Welcome back and happy new year! Our Morning Money non-resolutions include more fresh air, less doomscrolling and a steady diet of scoops, analysis and fresh insights in MM in 2022. Have suggestions? Hit us up at kdavidson@politico.com or aweaver@politico.com, or on Twitter at @katedavidson or @aubreeeweaver. | 
