My assessment of the current state of the economy is optimistic. I also think there is a real possibility that some of the factors that have been holding back growth in recent years could shift, moving the economy onto a higher growth trajectory. That said, I currently see this shift more as a clear possibility than an unarguable reality.
Importantly, we have not yet seen any sustained pickup in productivity growth. However, given that conditions could shift, it is fair to ask what a higher growth path might mean. As I discussed, it could mean a higher natural interest rate, which would increase the amount of accommodation provided at a given level of the Federal Reserve’s policy interest rate.