Fed’s ‘Golden Path’ to Soft Landing Aided by Productivity Boom
- Officials are skeptical of how long efficiency gains can last
- Lofty figures are a reminder of Greenspan’s 1990s expansion
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Wall Street economists are looking for the post-Covid boom in productivity to continue, which would sustain strong growth without a pickup in inflation. Federal Reserve officials are intrigued by the idea, but a little bit skeptical.
Productivity growth has averaged 3.9% the last three quarters, more than triple the rate seen in the decade prior to the pandemic. When workers are more efficient, firms can generate more money to raise wages without charging higher prices, so monetary policy can be a bit less concerned about inflation.