The Fed Blinks First, Markets Cheer, but Risks Remain

So much for predictable policymaking. The Federal Reserve surprised markets by cutting interest rates, even though inflation has not yet convincingly moved toward target. Some voices within the central bank itself have questioned whether the step came too soon, especially given a labour market that is softening rather than collapsing. New import tariffs add another layer of uncertainty to the inflation outlook. Investors, however, chose to focus on the comfort of cheaper money. This week, purchasing managers’ indices will offer a more up-to-date snapshot of economic momentum, while several other central banks prepare their own decisions. At the same time, companies across sectors such as energy, technology and staffing will present fresh results. Their guidance may tell us more about underlying demand than any speech or policy statement.