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what would you recommend to the Fed at its next FOMC meeting on December 15-16, 2020 if the U

Economics Dec 12, 2020

what would you recommend to the Fed at its next FOMC meeting on December 15-16, 2020 if the U.S. unemployment rate fell from its current 6.9% rate to 6.1% and the U.S. annualized inflation rate increased from 2% to 2.2% in November 2020?

Expert Solution

As US economy is currently struggling under deflationary pressures due to coronavirus crisis and these greenshoots of reducing unemployment rate and increasing inflation will provide some sigh of relief. In this case I would recommend to keep status quo and rates unchanged so as to let economy strenghten further. Also I do not see inflationary risks in near term due to lack of demand in the economy therefore keeping status quo seems best.

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