Is the high-growth and low inflation era from the late 90's over? According to an article by James Cooper in the April 2 Business Week magazine the "technological innovation fueled a speedup in productivity growth that helped the economy grow faster, create more jobs, and generate faster pay growth - all without boosting inflation."
The fed is always trying to balance rising inflation and a weaker economy. Inflation now is higher than the Fed would like. Investors expect the Fed to cut rates later this year. With productivity continue to slow and companies investing less in capital improvements even though they have strong balance sheets the economy will continue to slow.
JP Morgan estimates that the noninflationary growth rate will be no higher than 2.5%. The Central bank has projected inflation will end the year in the range of 2 - 2.5 %. Preferred inflation rate by the policy makers is in the 1 - 2% range. To get back to this comfort zone the Fed will probably have to squeeze the economy harder than it has in the past.