MNI BRIEF: Fed's Williams Says R-Star To Stay Low In U.S.

Federal Reserve Bank of New York President John Williams said Thursday a prolonged period of low neutral interest rates appears likely to persist over the medium term in the United States and other major world economies. 

"The low r-star era I think is still with us and we still need to be very focused on issues around the ELB, at least over the medium term, for the U.S. and maybe other jurisdictions," he said in a presentation at the Goethe University Institute for Monetary and Financial Stability in Frankfurt. (See: MNI INTERVIEW: More Fed Cuts Risk Inflation Spike-Weinberg) 

"The bond market is suggesting much higher r-stars, but I would discount that a bit, because they've tended not to be reliable," said Williams, the current vice chair of the FOMC. Productivity growth rates appear "good," but he expressed some skepticism that productivity will cause a surge in the neutral rate of interest.