How Productivity Gains Could Shape the Fed's Inflation Battle

The Federal Reserve’s journey towards achieving a ‘soft landing’ for the economy may be bolstered by a remarkable surge in productivity witnessed in the post-Covid era. Wall Street economists are optimistic that the trend of high productivity growth, which has seen an average increase of 3.9% over the last three quarters — a rate more than triple that of the decade before the pandemic — will persist. This productivity boost allows companies to increase wages without raising prices, potentially easing inflation concerns and allowing for a more lenient monetary policy stance.