NY Fed's latest DSGE model forecast projects a faster pace of growth
NY Fed's latest DSGE model forecast projects a faster pace of growth for over the 2019-2022 horizon versus the June projections, largely due to improved productivity. All of the new GDP estimates are above 2%. For 2019 Q4/Q4 the model now estimates a 2.4% growth rate versus 1.8% in the prior forecast due to better than expected Q2 activity. And 2020 growth is estimated at a 2.1% clip versus 1.6% in June, with 2021 now at 2.2% versus 1.8%, while the 2020 estimate is at 2.1% versus 1.8%. Also, core PCE inflation is seen picking up a bit to a 1.6% pace, versus 1.4% previously. However, the rest of the estimates over the 2020-2022 time frame show slowing inflation with 2020 seen at 1.3% from 1.4%. The neutral rates of interest was also nudged lower with the 2019 rate projected at 0.9% versus 1.2% previously. The NY Fed reminded, however, that "DSGE (Dynamic Stochastic General Equilibrium) model forecast is not an official New York Fed forecast, but only an input to the Research staff's overall forecasting process."