Liberty Street Economics

« | Main | »

March 9, 2018

The New York Fed DSGE Model Forecast–March 2018

This post presents a quarterly update of the economic forecast generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe our forecast very briefly and highlight its change since November 2017.

As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

The March model forecast for 2018–21 is summarized in the table below, alongside the November 2017 forecast for the same period, and in the charts that follow. The model uses quarterly macroeconomic data released through the fourth quarter of 2017 and available financial data and staff forecasts through February 21, 2018.

The New York Fed DSGE Model Forecast–March 2018

The New York Fed DSGE Model Forecast–March 2018

The New York Fed DSGE Model Forecast–March 2018

The New York Fed DSGE Model Forecast–March 2018

How do the latest forecasts compare with the November forecasts?

  • The current Q4/Q4 GDP growth forecast for 2018, at 2.1 percent, is higher than in November. Favorable financial conditions continue to provide stimulus to the economy. Moreover, growth in the fourth quarter of 2017 was stronger than predicted by the model in November. Growth is expected to moderate to 1.9 percent in 2019 before accelerating again to about 2.1 percent in the following years, roughly comparable with the November forecast.
  • Short-run inflation forecasts are much higher than they were in November. However, inflation is still projected to decline in the medium run, reaching 1.7 percent in 2021.
  • Largely reflecting the continued improvement in financial conditions, the model’s estimate of the real natural rate of interest—the real rate of interest that would prevail in the economy absent nominal rigidities and markup shocks—is higher over the forecast horizon relative to the November estimate. The natural rate is projected to increase throughout the forecast horizon, reaching 1.0 percent at the end of 2018 and 1.4 percent in 2019.


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Michael CaiMichael Cai is a senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

Marco Del NegroMarco Del Negro is a vice president in the Bank’s Research and Statistics Group.

Abhi GuptaAbhi Gupta is a senior research analyst in the Bank’s Research and Statistics Group.

Pearl LiPearl Li is a senior research analyst in the Bank’s Research and Statistics Group.

How to cite this blog post:

Michael Cai, Marco Del Negro, Abhi Gupta, and Pearl Li, “The New York Fed DSGE Model Forecast—March 2018,” Federal Reserve Bank of New York Liberty Street Economics (blog), March 9, 2018,

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.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

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.