Last week saw a significant shift in US monetary policy as the Federal Reserve initiated its first interest rate cut in four years. In a bold move, the central bank reduced the Federal Funds Rate by 50 basis points, lowering it to a range of 4.75% to 5.00%, according to a report by MIDF Research. This policy shift comes amid rising concerns over a cooling labour market, with Fed Chair Jerome Powell highlighting that future rate cuts will be driven by incoming data and broader economic conditions.

Interestingly, despite this move, US retail sales displayed resilience, rising by an unexpected 0.6% in August, reflecting solid consumer demand. Additionally, initial jobless claims fell to 219,000, marking the lowest level since May and reinforcing the strength of the labour market.

However, the US housing market continued to struggle, with existing home sales declining by 2.5% in August. Elevated home prices and higher borrowing costs are weighing on demand, though an increase in supply has offered a slight reprieve for buyers.

Global Markets in Focus

Across major markets, a majority of indices posted weekly gains, driven by positive momentum in Asia. Hong Kong's Hang Seng Index led the way with a 5.12% increase, followed by the Philippine PSEi (+3.27%) and Japan's Nikkei 225 (+3.12%). Meanwhile, Malaysia's FBM KLCI saw a modest rise of 1.01%.

In contrast, the FTSE 100 and Indonesia's JCI were the weakest performers, falling by 0.52% and 0.88%, respectively. Despite the mixed performance, the broader global market sentiment remained optimistic.

Monetary Policy Divergence

The Bank of England maintained its interest rate at 5.0%, though it extended its bond reduction programme by GBP 100 billion, signalling caution despite inflation holding steady at 2.2% year-on-year. Meanwhile, private rents across the UK surged by 8.4%, reflecting rising housing costs.

In Europe, the ECB is adopting a more gradual approach to rate cuts, with its chief economist, Philip Lane, advocating for caution if incoming data align with current forecasts. ECB President Christine Lagarde warned of the profound uncertainty in the global economy, underscoring the need for a measured approach.

Elsewhere, Japan's central bank kept interest rates unchanged, prioritising economic growth despite persistent inflation. The Bank of Japan's cautious stance comes as core inflation exceeded its 2% target for the fourth consecutive month, rising to 2.8% in August.

Malaysia's Strategic Moves and Economic Gains

Closer to home, Malaysia unveiled the Forest City Special Financial Zone (SFZ) in Johor, offering attractive incentives, including a corporate income tax rate of 0%-5% and a 0% tax rate for family wealth offices. These measures are expected to attract high-net-worth individuals and financial institutions, solidifying Malaysia's status as a premier investment destination.

The Ringgit gained ground against the US dollar, appreciating by 2.27% to close at RM4.2037. Meanwhile, Brent crude oil prices rose by 4.02%, reaching USD 74.49 per barrel, and crude palm oil prices increased by 4.56% to RM3,947.00 per tonne.

As global economies navigate varying monetary strategies and market conditions, the outlook remains one of cautious optimism, with regional dynamics continuing to influence growth trajectories.