The New York Fed's Laubach-Williams model estimates R-star (the neutral interest rate supporting stable growth and inflation) at 1.65% through the second quarter of 2026, down slightly from 1.73% in the first quarter but up from 1.36% in the first quarter of 2025. Investors and analysts say the model may understate the current rate because heavy U.S. borrowing, artificial-intelligence investment and bond issuance by hyperscalers are competing with Treasuries for capital. A higher neutral rate would imply that interest rates settle at structurally elevated levels, putting further pressure on bond prices and complicating the Federal Reserve's rate-cutting path. Analysts caution that R-star is difficult to measure, varies across models and time horizons, and requires years of data to determine whether the recent investment surge represents a lasting economic shift or a temporary cycle. AI could eventually reduce inflation and lower the neutral rate, but its near-term effect may be the opposite.