The US Federal Open Market Committee (FOMC) kept interest rates on hold last week. Despitean inordinate amount ofpressure from Trump to cut ratesand elements of USmarket datasignalling a need for loosening ofmonetary policy, Jerome Powell, Chairman of The Fed, stood firm.

This current situation can only be described as having thekey ingredients for a blockbuster movie… not only hasthe President of the United Statesexplored if he has the abilityto sack the Chairman of The Fed, he isalso fully embroiled in atrade war withChina, which thus far, hasresulted inbillions of USdollars inlost revenue on both sides of the globe. Powellis certainlystuckbetween a rock and a hard place; he is in the unenviable position of managing interest rateexpectations while Trump continues to bully The Fed to cut rates.

While there was no interest rate rise in June, whichis a sensible move, as The Fed must show independence from politics, it is likely that pressure to cutwill continue to mount over the coming months.Powell’s speech was certainly more dovish showing a marked shift in language. The Fed Chairman had previously described the committee’s approach to assessing economic data as patient however, Powell highlighted that uncertainties around this outlook increased i.e. the darkening outlook trade wars with Chinais having onthe economy, coupled with muted inflation meansthat the committee will act as appropriate to sustain expansion.

The question is how low can The Fed go? with two interest rate cuts a high possibility in 2019, we could expect as many as three or four before the end of the year; although the currentprobability of any of these moves is below 40%, which means that markets will take some comfort,for now at least, that The Fed will remain accommodative, which will support markets.

In a move away from monetary policy, which I am sure Powell will no doubt be thankful for, the global focus will shift away from the US to the G20 summit, which will be held from 28^th-29^thJune. Japan will host their first ever G20 summit in Osaka and it’s expected that tensions around trade wars could escalate further.