The recent decision by the US Federal Reserve to cut interest rates has sparked significant attention across global markets, including here in Singapore. Whenever the US Fed makes changes to its policies, it typically sends ripples throughout the world, and this case is no exception. As interest rates drop in the US, it is expected that Singapore’s property market will feel the effects too, particularly in the areas of mortgage rates, property investment, and fixed-income products.
Table of contents Rate cut announcement
On September 18, the US Federal Reserve announced a cut in interest rates by half a percentage point. This reduction is especially notable because it is the first time in over four years that the Fed has taken such action. The timing is also crucial, given that it comes right before the US presidential election in November. The decision was intended to lower borrowing costs and provide support to the economy, which had been experiencing slowing inflation.
Fed’s objective
According to Federal Reserve Chairman Jerome Powell, this rate cut is aimed at keeping the US labour market strong while ensuring moderate economic growth. At the same time, it is part of a larger effort to bring inflation down to 2% sustainably. Since July 2023, the Fed has held interest rates between 5.25% and 5.5%, having brought them down from a 40-year high. Now that inflation is nearing their target, the rate cut serves as a tool to balance the economy and prevent further disruptions.
Reason for the rate cut
The driving force behind this cut is the Federal Reserve’s concern over declining inflation and the potential threat of an economic slowdown. Fading inflation can be an indicator that economic activity is slowing down, and there are concerns that this could lead to further weakness in the