Barkin: Risk of inflation 'festering' worse than of Fed overdoing rate increases

BY Reuters | ECONOMIC | 09/30/22 02:03 PM EDT

WOODBRIDGE, Va. (Reuters) - "Festering" inflation remains a bigger threat to the economy than the risks of Federal Reserve rate hikes going too far and causing unnecessary damage in the effort to control it, Richmond Fed President Thomas Barkin said on Friday.

"At this point the risk of inflation festering feels like a bigger risk than inflation coming down on its own and us having oversteered," Barkin said in remarks to reporters after a chamber of commerce event.

Barkin said he was reserving judgment on the proper rate increase for the Fed's next meeting, but that data released Friday showed inflation continued to be both broad and persistent.

(Reporting by Howard Schneider; Editing by Chris Reese)

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.