Jackson Hole, the ‘Great Moderation,’ and U.K.-EU Trade Realities

Northern Trust /

01-09-2025

Northern Trust’s Weekly Economic Commentary (29 August 2025) reviews Powell’s Jackson Hole address, prospects for a new Great Moderation, and the evolving U.K.-EU trade relationship.

Fed policy: Powell signaled support for a September rate cut, previewing a framework that abandons overshooting inflation and balances employment “deviations” with price stability.
Great Moderation 2.0? AI-driven productivity echoes past growth surges, but globalization’s retreat and tariff-driven inflation make a repeat less likely.
Brexit legacy: U.K. goods exports to the EU remain 16% below 2019 levels; the recent “reset” agreement offers only modest GDP gains (~0.3% by 2040).

Could AI-led productivity gains outweigh deglobalization to anchor stability in the years ahead? The full report explores this critical balance.

Government Policies Monetary Policy

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