In the scenario where a recession is expected to turn into an expansion in a short time, the best approach would generally be:
Use monetary policy to lower interest rates.
Lowering interest rates can stimulate borrowing and spending by consumers and businesses, which can help boost economic activity during a recession. If the economy is anticipated to expand shortly after the recession, lower interest rates can facilitate a quicker recovery and transition toward a growth phase by making credit more accessible and affordable.
Using fiscal policy to lower interest rates is not directly possible, as fiscal policy deals with government spending and taxation rather than interest rates. Therefore, focusing on monetary policy to adjust interest rates is the most effective approach in this context.
Do nothing and letting the economy fix itself could work if the expected turnaround is very near, but it may not leverage timely interventions that could expedite recovery. Raising interest rates, on the other hand, would likely hinder growth and exacerbate the recession.
In summary, the recommended approach is to use monetary policy to lower interest rates.