The Fed Is Driving the Economy Without Knowing Its Speed Limit

The economy can only go so fast without overheating. A big problem right now is that no one is sure how fast it will be.

Before the pandemic, the US economy appeared to have been stuck in slow growth mode for some time. Increased productivity — workers’ ability to get more done in a given amount of time — has decreased, while an aging population means the number of workers available is growing less rapidly than before. As a result, most economists have calculated that potential gross domestic product growth, a measure of how quickly the economy grows without inflation, has fallen. The Congressional Budget Office estimates that potential growth for the decade ending 2019 averaged 1.7 percent annually compared with 3.1 percent in the 1990s. The Fed Is Driving the Economy Without Knowing Its Speed Limit

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