Will Fed 'Chicken Out' Or 'Hang Tough' If Higher Rates Cause Crisis, Asks Peter Schiff: A Majority Say...

Euro Pacific Capital Chief Economist Peter Schiff conducted a poll on Twitter, asking what the Federal Reserve would do if inflation remains well above the 2% target but higher interest rates cause another financial crisis.

"Will the Fed chicken out and pivot, sending the inflation rate to new highs, or will it hang tough and let the crisis play out naturally," Schiff asked in a poll he conducted on Twitter.

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Interestingly, 64.7% of participants voted that the Fed would “chicken out” which will cause price rises to continue and hit new highs. Only 35.3% of participants believe the central bank would hang tough.

Economic data this month, however, have not been too encouraging. Tight labor market conditions and higher-than-expected inflation in December caused the markets to take a break from their January rally.

Price Action: Major Wall Street indices closed over 1% lower on Friday as the core personal consumption expenditures price index, the Fed's preferred measure of inflation, rose 0.6% in January and 4.7% from the prior year, above a Wall Street estimate of 4.3%. 

The SPDR S&P 500 ETF Trust SPY fell 1.07% on Friday, while the Vanguard Total Bond Market Index Fund ETF BND lost 0.55%.

Fed officials have been increasingly sounding out the need to for more rate hikes. Last week, New York Federal Reserve Bank President John Williams said the central bank is committed to guiding inflation down to its 2% target while St. Louis Federal Reserve President James Bullard stated a relatively aggressive interest rate hike now would give the FOMC a better chance to rein in inflation.

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