5  A CDS is a derivative contract in which one party, the protection “seller,” agrees to insure another party, the protection “buyer,” from default on an underlying bond or index of bonds in exchange for a fee.
However, it is monetary policy that can prevent an effect on the rate of inflation over a more extended period. That is, following the initial price level shock, an appropriate adjustment of the interest rate (if necessary) can stop a potential second round of repercussions on wages and prices.