Assume the following information is given to Federal Reserve policy makers: Core inflation is stable at 2% per year but non-core inflation is rising rapidly at 6% per year. What policy response is likely from the Federal Reserve's policy makers? The Federal Reserve will assume that the long-run inflation rate in the US is stable at 2% and ignore the rise in non-core inflation. The Federal Reserve will assume that the long-run inflation rate in the US has risen to 6% and increase interest rates quickly to contain the inflation. None of the statements are correct. The Federal Reserve will assume that a recession is coming in the US and lower interest rates to reduce the severity of the likely downturn. The Federal Reserve will assume that the long-run inflation rate in the US has risen by about 4% (an average of the core and non-core inflation rates) and increase interest rates slowly to contain the inflation