The new post and economic forecast model from the Federal Reserve Bank of New York might not be accompanied by "Happy Days Are Here Again," but it contains some of the most upbeat forward-looking consideration of the future.

The New York Fed's dynamic stochastic general equilibrium (DSGE) model — not an "official" New York Fed forecast, but an input to the overall forecasting process — suggests that the core inflation of 3.7% in 2023 will cool to 2.5% by the end of 2024 and over two more years down to 2.1% as 2026 closes. GDP growth of 1.0% this year would slow to 0.4% by 2025 and then back to 0.9% the following year. The natural rate of interest — the rate supporting maximum economic output and full employment — would drop from 2.2% this year to 1.3% by 2026.

"The change in the forecast relative to March is very substantial. Output growth is projected to be much higher throughout the forecast horizon than in March (1.0, 0.7, and 0.4 percent in 2023, 2024, and 2025 versus 0.2, 0.0, and 0.0 in March, respectively)," the New York Fed wrote in a blog post. "The probability of a not-so-soft landing, defined as four-quarter GDP growth dipping below -1 percent, by the end of 2023 has declined to 26 percent from 41 percent in March and 70 percent last September."