Liberty Street Economics

Liberty Street Economics

December 12, 2025

The New York Fed DSGE Model Forecast— December 2025

Marco Del Negro, Ibrahima Diagne, Keshav Dogra, Elena Elbarmi, Donggyu Lee, and Michael Pham

decorative illustration: chart and stock prices background.

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since September 2025. To summarize, growth in 2025 is expected to be stronger than in September due to a lower projected path of the policy rate, as well as higher productivity. Inflation projections are higher in 2025 because of cost-push shocks, which capture the effects of tariffs. The model’s predictions for the short-run real natural rate of interest (or r*) in 2025 have decreased relative to September.

Continue reading »
Posted at 9:00 am in DSGE | Permalink | Comments (0)
November 25, 2025

The Future of Payment Infrastructure Could Be Permissionless

Rod Garratt and Michael Junho Lee

USD Coin Stock Market Ticker Crypto World 1 - Positive Returns - Green Version 1

Following the recent passage of legislation in the U.S., payment stablecoins seem to be on the brink of wider-scale adoption and explosive growth in market capitalization. In this post, we contend that the driving factor is not their proximity to digital cash instruments, but rather how they are transferred—via global, open-access, peer-to-peer systems, or “permissionless blockchains,” for short.

Continue reading »
Posted at 7:00 am in Cryptocurrencies | Permalink | Comments (0)
November 24, 2025

How Businesses Set Prices—In Their Own Words

Wändi Bruine de Bruin, Keshav Dogra, Sebastian Heise, Edward S. Knotek II, Brent H. Meyer, Robert W. Rich, Raphael S. Schoenle, Giorgio Topa, and Wilbert van der Klaauw

Price tag on a clothes rack with the inscription Pullover, Sweater 26.99

There has been a lot of interest in firms’ pricing decisions in the past few years—both during the inflation surge of 2021-23 and in the more recent rounds of tariff increases. In this post, we let firms speak for themselves about what factors they consider when adjusting prices in response to various shocks. The analysis is based on an ongoing research project, joint with the Atlanta and Cleveland Federal Reserve Banks, on how businesses set prices and the extent of passthrough of cost increases. In particular, we leverage the qualitative portion of the study based on open-ended interviews with senior decision-makers on how they approach pricing decisions in their firms. Rather than a uniform approach, a very nuanced picture emerges of businesses trying to balance competing objectives while keeping an eye on demand conditions for their products as well as on their direct competitors’ behavior in the market.

Continue reading »
Posted at 7:00 am in Inflation | Permalink | Comments (0)
November 19, 2025

Is Monetary Policy Still Seasonal? 

Richard Crump, Keshav Dogra, and Dennis Kongoli

LSE_2025_monetary-policy-seasonal_crump_460

A 2012 Liberty Street Economics post noted that U.S. monetary policy exhibits a surprising degree of seasonal behavior: over the 1987-2008 period, the Federal Reserve was much more likely to lower interest rates (or abstain from raising rates) in the first month of each quarter than in the two subsequent months. Thirteen years later, we revisit that analysis to investigate whether the seasonal pattern in monetary policy still holds today, in the wake of a rate hiking cycle, a pandemic, a surge in inflation, and a second round of rate hikes. We find that the pattern has indeed continued; however, unlike in the earlier sample period, it can be completely explained by the timing of the FOMC calendar.

Continue reading »
Posted at 7:00 am in Monetary Policy | Permalink | Comments (0)
November 18, 2025

Banks Develop a Nonbank Footprint to Better Manage Liquidity Needs

Nicola Cetorelli and Saketh Prazad

central banking and international currency concept. Businessman exchanging dollar Yuan Yen Pound sterling and Euro for forex and currency exchange money transfer. international currency, world bank

In a previous post, we documented how, over the past five decades, the typical U.S. bank has evolved from an entity mainly focused on deposit taking and loan making to a more diversified conglomerate also incorporating a variety of nonbank activities. In this post, we show that an important driver of the evolution of this new organizational form is the desire of banks to efficiently manage liquidity needs.

Continue reading »
Posted at 7:01 am in Financial Institutions, Financial Intermediation, Nonbank (NBFI) | Permalink | Comments (0)

U.S. Banks Have Developed a Significant Nonbank Footprint

Nicola Cetorelli and Saketh Prazad

central banking and international currency concept. Businessman exchanging dollar Yuan Yen Pound sterling and Euro for forex and currency exchange money transfer. international currency, world bank

 
In light of the rapid growth of nonbank financial institutions (NBFIs), many have argued that bank-led financial intermediation is on the decline, based on the traditional notion that banks operate to take in deposits and make loans. However, we argue that deposit-taking and loan-making have not accurately characterized U.S. banking operations in recent decades. Instead, as we propose in this post, absent regulatory restrictions, banks naturally expand their boundaries to include NBFI subsidiaries. A significant component of the growth of NBFIs has in fact taken place inside the boundaries of banking firms.  

Continue reading »
Posted at 7:00 am in Banks, Financial Intermediation, Nonbank (NBFI) | Permalink | Comments (0)
November 12, 2025

How Has Treasury Market Liquidity Fared in 2025?

Michael J. Fleming

Interest rates concept. 3D illustration

In 2025, the Federal Reserve has cut interest rates, trade policy has shifted abruptly, and economic policy uncertainty has increased. How have these developments affected the functioning of the key U.S. Treasury securities market? In this post, we return to some familiar metrics to assess the recent behavior of Treasury market liquidity. We find that liquidity briefly worsened around the April 2025 tariff announcements but that its relation to Treasury volatility has been similar to what it was in the past.

Continue reading »
Posted at 7:00 am in Financial Markets, Liquidity, Treasury | Permalink
November 6, 2025

Economic Capital: A Better Measure of Bank Failure?

Beverly Hirtle and Matthew C. Plosser

Financial stability: A classic bank building with columns, financial symbols, and charts, showcasing the reliability and trustworthiness of a bank

Bank failures and distress can be costly to the economy, causing losses to creditors and reducing the flow of credit and other financial intermediation services. Thus, there is significant value in being able to identify “at risk” banks in a timely and accurate way. In a previous post, we presented a new solvency metric, Economic Capital, and showed how solvency risks in the U.S. banking industry have evolved over time according to this measure. In this post, we continue to draw on our recent Staff Report to present analysis showing that Economic Capital identifies failing banks earlier and more accurately than more conventional solvency measures.

Continue reading »
Posted at 7:00 am in Bank Capital | Permalink
November 4, 2025

Banking System Vulnerability: 2025 Update

Matteo Crosignani, Thomas Eisenbach, and Fulvia Fringuellotti

Banking System and Electronic Transfer for Business

As in previous years, we provide in this post an update on the vulnerability of the U.S. banking system based on four analytical models that capture different aspects of this vulnerability. We use data through 2025:Q2 for our analysis, and also discuss how the vulnerability measures have changed since our last update one year ago.

Continue reading »
Posted at 7:00 am in Bank Capital, Banks, Financial Institutions, Liquidity, Systemic Risk | Permalink
October 16, 2025

The Shadow Value of Central Bank Lending

Tomas Jankauskas, Ugo Albertazzi, Lorenzo Burlon, and Nicola Pavanini

Frankfurt, Hesse / Germany - May 16, 2018: Sign at the entrance of new European Central Bank headquarters in Frankfurt, Germany - the ECB is the central bank for the euro

After the Great Financial Crisis, the European Central Bank (ECB) extended its monetary policy toolbox to include the use of long-term loans to banks at interest rates close to zero or even negative. These central bank interventions were aimed at supporting the transmission of expansionary monetary policy and likely played a crucial role in bolstering the financial stability of the euro area, namely by reducing the chance of bank runs. However, quantitative evidence on the effects of these interventions on financial stability remains scant. In this post, we quantify the effectiveness of central bank lending programs in supporting financial stability through the lens of a novel structural model discussed in this paper.

Continue reading »
Posted at 7:00 am in Banks, Central Bank | Permalink
More Posts »

RSS RSS Feed

Twitter Follow Liberty Street Economics

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

View by Topic

Most Read this Year

  1. Are Businesses Absorbing the Tariffs or Passing Them On to Their Customers?
  2. Credit Score Impacts from Past Due Student Loan Payments
  3. Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble 
  4. Why Does the U.S. Always Run a Trade Deficit?
  5. Is College Still Worth It?
Useful Links
Comment Guidelines

 

We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.

Archives