The New York Fed DSGE Model Forecast—June 2019

Sushant Acharya, Michael Cai, Marco Del Negro, Ethan Matlin, and Reca Sarfati

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 January 2019. 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 June model forecast for 2019-22 is summarized in the table below, alongside the January forecast, and in the following charts. The model uses quarterly macroeconomic data released through the first quarter of 2019, and financial data and staff forecasts available through May 31, 2019.

How do the latest forecasts compare with the January forecasts?

• The current 2019 Q4/Q4 GDP growth forecast is a bit stronger than the one from January (1.8 percent vs. 1.6 percent), as 2019:Q1 real GDP growth was higher than expected. The model attributes the faster growth relative to the January projection to a temporary bout of productivity. The output growth forecast is broadly similar to the January one for the remainder of the forecast horizon.
• Inflation is expected to be about 0.1 percentage point higher than in January through 2021. Still, the modal projection for inflation is below the Federal Open Market Committee’s long-run target throughout the forecast horizon. The uncertainty surrounding both the output growth and the inflation projections is sizable.
• The estimates for the real natural rate of interest over the entire forecast horizon are broadly similar to those in January.

Sushant Acharya is an economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

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

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

Ethan Matlin is a senior research analyst in the Bank’s Research and Statistics Group.

Reca Sarfati is a senior research analyst in the Bank’s Research and Statistics Group.

How to cite this blog post:

Sushant Acharya, Michael Cai, Marco Del Negro, Ethan Matlin, and Reca Sarfati, “The New York Fed DSGE Model Forecast—June 2019,” Federal Reserve Bank of New York Liberty Street Economics (blog), https://libertystreeteconomics.newyorkfed.org/2019/06/the-new-york-fed-dsge-model-forecastjune-2019.html.

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Disclaimer

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.