##_US FED Chairman Jerome Powell Pivots Towards Interest Rate Cuts at Jackson Hole Summit_
_16 September 2024_
_David Rees, Emerging Markets Economist at Schroders_
We examine potential US interest rate reductions, the impact of “supply-side constraints” on UK rate decisions, and update our economic outlook.
### US Economy Insights
#### Powell’s Announcement
US Federal Reserve Chairman Jerome Powell, at the Jackson Hole summit, declared there’s “ample room” to react to a cooling economy. His statement laid the groundwork for future interest rate reductions.
#### Fed’s Next Move
The Fed is expected to announce its decision on interest rates this Wednesday. We anticipate a one percentage point reduction in the Fed Funds target range, currently set at 5.25% – 5.50%. This cut should protect the economy and keep inflation in check FAnews(https://www.federalreserve.gov).
### UK Economic Challenges
#### Impressive Economic Growth Despite Constraints
The initial UK GDP growth estimate for Q2 surpassed expectations, compelling us to revise our forecasts upwards for this year and the next. Yet, “supply-side constraints”, like limited goods and labour supply, suggest the economy might hit capacity barriers. These constraints could prolong inflationary pressures, reducing the Bank of England’s ability to promptly lower interest rates.
### Economic Forecast Updates
Our projections for both the US and UK economies reveal critical insights into how different factors might influence future economic outcomes.
| Country | Current Interest Rate | Projected Rate Cut | Key Influences |
|———|———————–|——————-|—————-|
| US | 5.25% – 5.50% | 1 percentage point | Cooling Economy |
| UK | Variable | Limited | Supply Constraints |
### Concluding Remarks
In summary, while Powell’s announcement signals potential US interest rate cuts, the UK faces distinct challenges. “Supply-side constraints” may hamper the UK’s ability to reduce rates swiftly. As we continue monitoring these developments, it’s crucial for policymakers to weigh their decisions carefully to ensure economic stability.
For further details on the economic projections, please visit [Schroders](https://www.schroders.com).
- Keep checking reliable sources for real-time updates on interest rates and economic indicators.
- Note that the ability of central banks to adjust interest rates rapidly depends on various macroeconomic factors.
