Williams Says He’d Discount Bond Market’s Neutral-Rate Estimate

Federal Reserve Bank of New York President John Williams said model estimates of the US neutral interest rate are lower than bond-market estimates, which he cautioned are unreliable.

“The bond market is suggesting much higher r-stars, but I would discount that a bit because they’ve tended not to be reliable,” Williams said Thursday during an event organized by Goethe University in Frankfurt, Germany.

Economists often refer to the so-called neutral rate — where it should be when monetary policy isn’t fighting unemployment or inflation — as “r-star,” based on the mathematical notation used to represent it in economic models.

Models ...