According to the Taylor rule, when the economy is at full employment and inflation is at its target rate of 2 percent, the Fed should

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03-12-2021
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According to the Taylor rule, when the economy is at full employment and inflation is at its target rate of 2 percent, the Fed should

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Tundexi Tundexi · Answer 1 · 2021-12-17T11:12:45+01:00

The Fed's do not need to increase the interest rates because the economy is at favorable situation.

The Taylor rule is an economic rule used as guidance on how the central banks should alter interest rates because of changes in the economy situation.

The Taylor's rule states that Fed's should increase the interest rates if the inflation rate or GDP growth rates are higher than desired.

So, since the economy is at full employment and inflation is 2 percent, then, the economy will be seen as favorable.

In conclusion, because of the economic situation, then, the Fed's do not need to increase the interest rates because the economy is at favorable situation.