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

Watch Fed's Williams Says He'd Discount Bond Market's Neutral-Rate Estimate - Bloomberg on Dailymotion

Transcript

00:00When you think about the modern economy, the modern financial system,

00:04you have to think about the neutral rate really in the global context

00:07because it's a global supply and demand for savings.

00:10So where do my estimates come out?

00:14So today, estimates over the four major economies of your area,

00:18U.S., Canada, and the U.K., are a little above half a percent,

00:23about where they were before the pandemic.

00:25If you look at the range of estimates from this other paper,

00:30it gets 0.6% as the current estimates, basically the same number.

00:34If you look at a bunch of U.S. macro model-based estimates,

00:37and I didn't go over those models.

00:39They're my competitors, so I'll let them speak to them.

00:41But actually, they're about 1%, so a little bit higher,

00:45a quarter percentage point higher than HLW for the U.S.,

00:49but basically still pretty low

00:52and only about a quarter percentage point above pre-pandemic real-time estimates.

00:57Again, the bond market is suggesting much higher R-stars,

01:00but I would discount that a bit because they've tended not to be reliable.

01:05And importantly, and this is where I would just remind us,

01:09even if R-star is higher,

01:12it doesn't mean the concerns about the lower bound

01:15should completely vanish from our kind of thinking.