The_King Posted May 5, 2022 Share Posted May 5, 2022 SINGAPORE: The US Federal Reserve’s biggest rate hike in 22 years will likely see interest rates in Singapore rise as well, translating to higher cost of debt for households and businesses, experts told CNA. But a robust local economy and the recent reopening of the economy may offset some of the pressure felt by local businesses, they added. The Federal Reserve on Wednesday (May 4) announced a half percentage point increase – its biggest increase since 2000 – to tackle soaring US inflation. With inflation at the highest rate in four decades, Federal Reserve Chair Jerome Powell said he was confident the economy was strong enough to withstand the rate increases without tipping into recession. After a quarter-point hike in March, the Federal Open Market Committee (FOMC) pushed the benchmark interest rate above 0.75 per cent as it works to cool the economy. The hike will raise the costs of all types of borrowing, from mortgages to credit cards and car loans. Singapore is an “interest-rate taker”, and its borrowing costs tend to track the US interest rates closely, explained Mr Yeap Jun Rong, a market strategist at IG. He said the 50 basis-point hike announced on Wednesday was “just the beginning”, with more hikes widely expected later this year. IMPACT ON SINGAPORE HOUSEHOLDS, BUSINESSES With the Federal Reserve set to hike rates a few more times this year, this will continue to put upward pressure on interest rates in Singapore in the short- and medium-term, said Mr Christopher Wong, Southeast Asia portfolio strategist at Fidelity International. These higher interest rates may be felt by Singapore households and businesses. “Households may be impacted by the rising cost of mortgage and other loans on top of the general rise in cost of living that they are currently already facing,” he said. The ongoing upward trajectory for US interest rates is likely to drive further upside for domestic rates in the coming months, and that may translate to higher cost of debt for both households and businesses, added IG's Mr Yeap. But he said that while rising debt may go against household spending, potential pent-up demand driven by the economic reopening and wage adjustments may support consumption in the near term. “For businesses, sectors which are more heavily reliant on debt may face greater challenges in protecting their margins and companies may be more cautious in taking on project investments with huge capital outlay,” said Mr Yeap. As interest rates rise, the cost of funding and refinancing has risen “quite significantly”, therefore business costs and mortgage rates have also increased, said OCBC Bank’s chief economist Selena Ling. “If businesses cannot fully pass on the higher business costs and workers do not get wage adjustments that commensurate with inflation, then there may be some margin pressure and belt tightening respectively,” Ms Ling said, adding that this could dampen capital expenditure investments and consumer spending. Mr Wong said the higher cost of loans for businesses will be added on to the already rising cost of operations, materials or utilities. “That said, the still-robust local economy and recent reopening of the economy may offset some of these pressures felt by local businesses,” he added. A recession for Singapore “looks unlikely”, said Ms Ling. While the stagflation risk has risen both globally and for Singapore, how things pan out from here would depend on other geopolitical issues, including Russia’s invasion of Ukraine, China’s COVID-19 lockdowns and growth slowdown, and whether the US and China manage a “soft landing”, among other headwinds, she added. IG’s Mr Yeap agreed, adding that the rising rates may slow economic growth momentum but it “does not necessarily derail the recovery”. The current environment still favours Singapore equities, given its sizeable allocation to banks that tend to do well in a rising rate environment, said Mr Wong. Singapore can also stand to benefit from a continued reopening of neighbouring Southeast Asian countries. Mr Eugene Leow, interest rate strategist at DBS Bank, said he expects the Fed funds rate's upper bound to reach 2.75 per cent by the end of the year. Ms Ling said the Fed is likely to hike by 50 basis-point increments for the next two FOMC meetings in June and July. “While this is the most aggressive move since 2000 ... Fed hawkishness has been building into this meeting,” said Mr Wong. “We believe the Fed will ultimately hike less than market expectations, but for now the hawkish stance is likely to remain intact given the strong state of the labour market and inflationary dynamics.” Source: CNA/mi(ac) 1 Link to comment Share on other sites More sharing options...
socrates469bc Posted May 6, 2022 Share Posted May 6, 2022 jin kumgong. using monetary policy to solve what is ultimately a supply problem is going to trigger a stagflation. nb, never learn from history. 2 Link to comment Share on other sites More sharing options...
Bigbird Posted May 6, 2022 Share Posted May 6, 2022 23 hours ago, The_King said: A recession for Singapore “looks unlikely”, said Ms Ling. (OCBC Bank’s chief economist Selena Ling ) Wah..... Multi-million dollar PMO vs OCBC OCBC Bank’s chief economist Selena Ling looks more "Capable" woh!!! @socrates469bc How? Who's right? 2 Link to comment Share on other sites More sharing options...
aaur4man Posted May 7, 2022 Share Posted May 7, 2022 cibai right, after we sanction Russia still come out this lanjiao 2 Link to comment Share on other sites More sharing options...
The_King Posted May 7, 2022 Author Share Posted May 7, 2022 All these good news for ge2025 2 Link to comment Share on other sites More sharing options...
Huat Zai Posted May 7, 2022 Share Posted May 7, 2022 35 minutes ago, The_King said: All these good news for ge2025 Not scare, there will be a GST package and all these stupid sheep will forget everything 4 Link to comment Share on other sites More sharing options...
The_King Posted May 7, 2022 Author Share Posted May 7, 2022 7 minutes ago, Huat Zai said: Not scare, there will be a GST package and all these stupid sheep will forget everything Ya those auntie and uncle who's picture kena spam for stuff like this 1 2 Link to comment Share on other sites More sharing options...
socrates469bc Posted May 7, 2022 Share Posted May 7, 2022 23 hours ago, Bigbird said: Wah..... Multi-million dollar PMO vs OCBC OCBC Bank’s chief economist Selena Ling looks more "Capable" woh!!! @socrates469bc How? Who's right? this scotsman is rite most of the time. 2 Link to comment Share on other sites More sharing options...
Huat Zai Posted May 7, 2022 Share Posted May 7, 2022 16 minutes ago, socrates469bc said: this scotsman is rite most of the time. I hate this book, gives me a massive headache whenever I try to read it. But it really 1 Link to comment Share on other sites More sharing options...
Bigbird Posted May 7, 2022 Share Posted May 7, 2022 17 minutes ago, socrates469bc said: this scotsman is rite most of the time. Never seen this book before! TLDR. 1 Link to comment Share on other sites More sharing options...
socrates469bc Posted May 7, 2022 Share Posted May 7, 2022 4 minutes ago, Huat Zai said: I hate this book, gives me a massive headache whenever I try to read it. But it really long book short, market is best left alone with minimal zheng hu intervention or the 'invisible hand' of self interest will produce the best economic outcome. 2 Link to comment Share on other sites More sharing options...
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