Capital Market Forecasts: Taylor Rule Based on the Taylor rule, which of the following is TRUE? Based on discussions in class, the current Fed Funds rate is above what would be suggested by the Taylor Rule If the neutral rate is 3% and the forecasted GDP growth is running 1% quicker than the trend growth and the inflation forecast is at the target rate, then the Fed Funds rate should be 4% If the forecasted GDP growth is at the trend rate but inflation is forecasted to rise 5% and the target inflation rate is 2%, then the Taylor rule suggests that the Fed Funds rate should be 1.5% higher than the neutral rate The Taylor rule suggests that the slower the forecasted GDP growth and the slower the forecasted inflation rate the higher the Fed Funds rate should be to encourage borrowing If the forecasted GDP growth is higher than the trend growth rate, this rule suggests that the Fed should lower the Fed Funds rate