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Biden could reduce inflation, mitigate a recession, and strengthen democracy with a new EU-US trade agreement

Sanjay Patnaik, James Kunhardt

August 30, 2022

On both sides of the Atlantic, economies are showing signs of turmoil: Inflation is at the highest level in more than 40 years, the U.S. stock market has plunged significantly since its peak on January 3, and expectations for a recession are increasing both in the EU and in the U.S., particularly as the Federal Reserve and the European Central Bank are aggressively increasing interest rates to combat inflation. At the same time, the Russian war against Ukraine―with implicit support from China―has underlined the importance of the transatlantic partnership as a democratic bulwark against brutal authoritarian regimes and as a pillar of stability in the world. Policymakers looking for solutions to combat rapidly rising prices―fueled by a mix of supply chain bottlenecks (leading to a shortage of certain goods), rising energy prices, and heightened consumer demand―have largely turned to traditional monetary policy by raising interest rates, risking recession.

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