SINGAPORE – The era of high interest rates appears to be at a turning point after the United States central bank cut rates by half of a percentage point on Sept 18.
The cut brought the benchmark rate to the 4.75 per cent to 5 per cent range.
The US Federal Reserve sees rates falling by another half of a percentage point by the end of 2024, another full percentage point in 2025, and by a final half of a percentage point in 2026. The rate will likely end in a 2.75 per cent to 3 per cent range.
Mr Chen Jingwei, chief investment strategist of wealth management platform Wrise Private Singapore, noted that the Fed has likely cut rates to stimulate growth and prevent a slowdown.
“Lowering interest rates reduces borrowing costs for businesses and consumers, which can lead to increased spending, investment, and economic activity,” he said.
“However, this move also suggests the Fed is balancing concerns of inflation with the need to maintain economic stability, and it might be preparing for further economic challenges down the line.”
Singapore’s monetary policy is centred on the exchange rate, and interest rates here are largely determined by global rates and foreign exchange market expectations of the Singapore dollar.
The Straits Times looks at how the first US rate cut in four years could impact borrowers and investors here.
Q: How could my home loan change?
A: Borrowing is set to become cheaper following the US Fed’s move.
Fixed-rate home loan packages had already started to drop in anticipation of the cut, driven partly by intense competition among banks to attract mortgage customers, said SingCapital chief executive Alfred Chia.
“Yesterday’s rate cut signals the beginning of a potential downward trend. I expect this reduction in
