Liberty Street Economics

March 20, 2026

The New York Fed DSGE Model Forecast—March 2026

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

decorative photo: 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 December 2025. To summarize, growth in 2026 is expected to be more robust, and inflation more persistent, than predicted in December. Stronger investment is the main driver for higher growth, while cost-push shocks, possibly capturing the effects of tariffs, are the key factors behind higher inflation. Projections for the short-run real natural rate of interest (r*) are the same as in December.

Posted at 9:00 am in DSGE | Permalink | Comments (0)

March 4, 2026

Firms’ Inflation Expectations Return to 2024 Levels

Jaison R. Abel, Richard Deitz, and Nick Montalbano

Image of a cafe receipt with U.S. money on top to pay the bill.

Businesses experienced substantial cost pressures in 2025 as the cost of insurance and utilities rose sharply, while an increase in tariffs contributed to rising goods and materials costs. This post examines how firms in the New York-Northern New Jersey region adjusted their prices in response to these cost pressures and describes their expectations for future price increases and inflation. Survey results show an acceleration in firms’ price increases in 2025, with an especially sharp increase in the manufacturing sector. While both cost and price increases intensified last year, our surveys reveal that these do not contribute to firms believing that inflation will be on the rise in the short or longer term. In fact, firms’ inflation expectations have moderated compared to what was expected a year ago. Firms now anticipate inflation of 3 percent in the year ahead, lower than what was expected last year at this time. Importantly, like last year, longer-term inflation expectations also remain well anchored.

Posted at 10:02 am in Inflation, New Jersey, New York, Regional Analysis | Permalink | Comments (0)

Are Rising Employee Health Insurance Costs Dampening Wage Growth?

Jaison R. Abel, Richard Deitz, and Nick Montalbano

Photo: light blue background, with a stethoscope and white paper image of family standing up.

Employer-sponsored health insurance represents a substantial component of total compensation paid by firms to many workers in the United States. Such costs have climbed by close to 20 percent over the past five years. Indeed, the average annual premium for employer-sponsored family health insurance coverage was about $27,000 in 2025—roughly equivalent to the wage of a full-time worker paid $15 per hour. Our February regional business surveys asked firms whether their wage setting decisions were influenced by the rising cost of employee health insurance. As we showed in our companion post, respondents reported an average increase in such costs of more than 13 percent this year. Businesses providing insurance to their workers indicated that absent these cost increases, they would have raised wages by roughly an additional percentage point, on average, suggesting that rising health insurance costs resulted in a drag on wage growth for workers at these firms.

Posted at 10:01 am in Labor Market, Microeconomics, New Jersey, New York, Regional Analysis | Permalink | Comments (0)

What’s Driving Rising Business Costs?

Jaison R. Abel, Richard Deitz, and Nick Montalbano

AI generated image of manufacturing of Solar Panels.

After a period of moderating cost increases, businesses faced mounting cost pressures in 2025. While tariffs played a role in driving up the costs of many inputs—especially among manufacturers—they represent only part of the story. Indeed, firms grappled with substantial cost increases across many categories in the past year. This post is the first in a three-part series analyzing cost and price dynamics among businesses in the New York-Northern New Jersey region based on data collected through our regional business surveys. Firms reported that the sharpest cost increases over the past year were for employee health insurance and utilities, followed by business insurance, and goods and materials inputs. Firms expect cost growth to moderate in 2026. Our second post will examine the sharp increase in employee health insurance costs in more detail and show that such rising costs dampened wage growth for some workers. The th ird post will analyze firms’ pricing behavior in light of these cost pressures, as well as firms’ inflation expectations.

Posted at 10:00 am in Inflation, New Jersey, New York, Regional Analysis | Permalink | Comments (2)

February 25, 2026

The Post‑Pandemic Global R*

Marco Del Negro, Elena Elbarmi, and Michael Pham

Illustration of a flat world map with a percent sign between north america continent and europe/africa continents. Colored in dark blue and golds.

In this post we provide a measure of “global” r* using data on short- and long-term yields and inflation for several countries with the approach developed in “Global Trends in Interest Rates” (Del Negro, Giannone, Giannoni, and Tambalotti). After declining significantly from the 1990s to before the COVID-19 pandemic, global r* has risen but remains well below its pre-1990s level. These conclusions are based on an econometric model called “trendy VAR” that extracts common trends across a multitude of variables. Specifically, the common trend in real rates across all the countries in the sample is what we call global r*. The post is based on the discussion of an insightful paper by Lukasz Rachel on the drivers of r* presented at the Brookings Papers on Economic Activity Fall 2025 conference.

Posted at 7:00 am in Macroeconomics | Permalink | Comments (0)

February 24, 2026

Estimating the Term Structure of Corporate Bond Risk Premia

Tomas Jankauskas

Image of a bond market yields, fixed-income securities, mortgage rates monitor.

Understanding how short- and long-term assets are priced is one of the fundamental questions in finance. The term structure of risk premia allows us to perform net present value calculations, test asset pricing models, and potentially explain the sources of many cross-sectional asset pricing anomalies. In this post, I construct a forward-looking estimate of the term structure of risk premia in the corporate bond market following Jankauskas (2024). The U.S. corporate bond market is an ideal laboratory for studying the relationship between risk premia and maturity because of its large size (standing at roughly $16 trillion as of the end of 2024) and because the maturities are well defined (in contrast to equities).

Posted at 7:00 am in Corporate Finance, Financial Markets | Permalink | Comments (1)

February 19, 2026

What Workplace Composition Are Job Candidates Looking For?

Rachel Schuh

A group of diverse people working together at a table in a cafe

Why do workers still segregate by sex across occupations, industries, and firms? Recent research has focused on how preferences for job amenities, like flexibility, may differ by sex. However, one “amenity” that has received relatively little attention is the sex composition of a job itself. In a recent paper, I conducted a survey experiment to estimate men’s and women’s preferences for sex composition in the workplace. One result is that women and young single men prefer jobs with at least half female coworkers.

Posted at 7:00 am in Demographics, Labor Market | Permalink

February 17, 2026

Seeing Through the Shutdown’s Missing Inflation Data

Martin Almuzara and Geert Mesters

Photo: Man's hand holding a wallet, with Inflation text and line chart overlay

Data releases for inflation have been scarce over the past four months due to the government shutdown. As a result, until January 22 no personal consumer expenditures (PCE) data were available beyond September and the consumer price index (CPI) had many missing entries for the one-month changes for October and November. In this post, we use an extended version of the New York Fed’s Multivariate Core Trend (MCT) inflation model to examine changes in underlying inflation over this period. The MCT model is well-suited to do so because it decomposes sectoral inflation rates into a trend (“persistent”) and a transitory component. In contrast to core (ex-food and energy) inflation, its aim is to remove all transitory factors, thus identifying the underlying trend. In addition, since the model can handle missing data—like for October—it can produce values for trend inflation for months where little or no data were released. Our findings suggest caution: while the fragmented data from November initially signaled a deceleration in price pressures, the integration of December data indicates that these reductions were largely transitory. Once the full data set is used, the aggregate trend for December stands at 2.83 percent, an increase from 2.55 percent in September.

Posted at 7:00 am in Inflation | Permalink

February 12, 2026

Who Is Paying for the 2025 U.S. Tariffs?

Mary Amiti, Chris Flanagan, Sebastian Heise, and David E. Weinstein

AI generated image of an Asian man in a warehouse with several shelves of cardboard boxes behind him as he scans two boxes in front of him getting ready to ship. Boxes say made in Vietnam.

Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers.

Posted at 7:00 am in International Economics | Permalink | Comments (18)

February 10, 2026

Where Are Mortgage Delinquencies Rising the Most?

Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle W. Scally, and Wilbert van der Klaauw

Photo: lower income neighborhood in the U.S.

The Federal Reserve Bank of New York’s Center for Microeconomic Data recently released its Quarterly Report on Household Debt and Credit for the fourth quarter of 2025, revealing continued growth in household debt balances. Aggregate household debt balances rose by $191 billion to reach $18.8 trillion, marking a $4.6 trillion increase since the end of 2019. Mortgage balances grew by $98 billion to $13.2 trillion, while credit card debt increased by $44 billion to $1.28 trillion. Credit card and auto loan delinquency rates appear to have stabilized, albeit at elevated rates. By contrast, the delinquency rate for mortgages—although still near low levels on a longer-term basis—has been steadily increasing over the past few years. Underlying these aggregate figures, however, there are notable differences in mortgage credit performance across places with different income levels and labor and housing market dynamics. This analysis, as well as the Quarterly Report on Household Debt and Credit, are based on anonymous credit report data from Equifax.

Posted at 11:00 am in Credit, Household Finance, Housing | Permalink

Markets & Policy Implementation

Liberty Street Economics

The New York Fed DSGE Model Forecast—March 2026

Firms’ Inflation Expectations Return to 2024 Levels

Are Rising Employee Health Insurance Costs Dampening Wage Growth?

What’s Driving Rising Business Costs?

The Post‑Pandemic Global R*

Estimating the Term Structure of Corporate Bond Risk Premia

What Workplace Composition Are Job Candidates Looking For?

Seeing Through the Shutdown’s Missing Inflation Data

Who Is Paying for the 2025 U.S. Tariffs?

Where Are Mortgage Delinquencies Rising the Most?

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