Summary

Riccardo Trezzi and Tilda Horvath anticipate slightly stronger US economic growth due to higher potential output and productivity growth. However, they note that higher growth won't necessarily persist indefinitely due to factors including interest rate effects and potential demographic shifts. The model suggests a more negative output gap, indicating potential future increases in unemployment. They emphasised the importance of understanding demographic trends, particularly labour force participation and immigration dynamics, in forecasting future economic conditions. They suggest that if the model's assumptions hold, there may be further positive surprises in economic growth and less likelihood of rate cuts, contrary to market expectations. The presentation underscores the significance of demographic factors in shaping economic outcomes and advises caution in interpreting economic data solely through traditional lenses.

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