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 high...
The strongest version of this narrative highlights the DSGE model’s adaptive response to unexpected economic resilience, particularly in investment and inflation dynamics. It credibly acknowledges upward revisions to growth and inflation while tempering long-term optimism with lower subsequent projections—a nuanced approach that avoids overconfidence. The explicit mention of AI-related investment and tariff-driven cost shocks provides concrete, testable mechanisms for the forecast changes, groun...