Fed's Daly: COVID-19 caused inflation, but Fed has to fix it

BY Reuters | ECONOMIC | 01/14/22 11:20 AM EST

Jan 14 (Reuters) - San Francisco Federal Reserve Bank president Mary Daly on Friday said COVID-19 is the main reason for overly high inflation, and the U.S. central bank needs to raise interest rates to reduce demand to bring it better in line with crimped supply.

The latest Omicron variant of COVID-19 will only extend the time period that inflation will last, because it means supply chains will stay tangled and workers hesitant to return to the labor force, Daly said in a New York Times interview on Twitter Spaces. "We are going to have to adjust policy to ensure we achieve price stability," she said, "We want to bridle the economy a little bit."

(Reporting by Ann Saphir, Editing by Franklin Paul)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.