The Federal Reserve has been shifting its policy guidance in a more hawkish direction during the first half of this year, with its “dot plot” now suggesting wide support for four rate hikes of 0.25 per cent in the current calendar year, as opposed to two or three hikes at the end of 2017.

However, an entirely new economic shock is now gaining momentum. The US administration seems determined to ratchet up the  scale of tariffs on Chinese imports (see  Martin Wolf). What initially seemed to be a skirmish with minimal effects on the economy has now become a more significant policy change that is difficult for the FOMC to ignore.

Investors will soon be asking an important question: in a bad scenario, can we expect a “Powell put” to take effect for risk assets, with the Fed coming to the markets’ rescue by tilting its policy guidance in a less hawkish direction?