Commentary: How Fast Can This Hot Rod Go?

New productivity data raise the speed limit on growth

In November, 1994, when the unemployment rate was hitting 5.6%, Federal Reserve Chairman Alan Greenspan was pushing the federal funds rate to 5.5%, and Wall Street economists were worried that he wasn't going far enough to head off incipient inflation. In November, 1999, the Fed has once more raised the funds rate to 5.5%. This year, however, the move is widely viewed as insurance. Unemployment is at 4.1%, and the economy is growing at over 4% annually, but nobody's panicking because inflation remains virtually dormant.

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