In the model, higher productivity lowers inflation, which calls for a flatter path for policy normalization than would otherwise be the case. 4 See Board of Governors of the Federal Reserve System (2018), “Federal Reserve Issues FOMC Statement,”  press release, December 19.
5 In the model of optimal monetary policy discussed in a paper by Clarida, Galí, and Gertler, the central bank is  able to offset fully exogenous declines in aggregate demand through adjustments in the expected path for the 4/5  BIS central bankers' speeches  policy rate.