We conclude that the downshift in US labour productivity and potential GDP growth is likely to persist over the coming years.
Low spending on high-tech investments is likely to hold back productivity growth and demographic forces are pushing down growth in labour supply.
There are conflicting implications for the Fed and markets depending on the time horizon considered: a faster near-term ascent of the fed funds rate but to a lower level.
Near term, slow productivity growth should allow for significant further progress in the labour market, including a further reduction in labour market slack and accelerating wages.
Longer term, a continuation of recent slow productivity growth would depress potential GDP growth and is likely to mean a lower terminal fed funds rate.
To read the entire report Please click on the pdf File Below