In this video update, Co-Head of Global Bonds Nick Maroutsos and Fixed Income Portfolio Manager Jason England explain why they believe the US Federal Reserve (Fed) was correct not to cut rates at their latest meeting on Wednesday 19 June, and discuss which factors may justify a move lower in July.

Key Takeaways

• The Fed’s removal of its “patient” language gives the central bank room to lower interest rates at its July meeting should the domestic and global economy exhibit signs of softening.
• Although the US economy appears stable, the risks posed by rising trade barriers, the absence of inflation and evidence that the Fed is willing to step in at any hint of a wobbling equity market (recognising last week’s record close) all increase the plausibility of a July rate cut.
• Lower policy rates will likely cause the front end of the yield curve to steepen, punishing investors who seek income while keeping duration low.