Interest rates in Singapore will rise in tandem with US rates: MAS

Interest rates are expected to increase in tandem with those in the United States, regardless of the Monetary Authority of Singapore's (MAS) surprise policy announcement on Wednesday. -- PHOTO: BLOOMBERG
Interest rates are expected to increase in tandem with those in the United States, regardless of the Monetary Authority of Singapore's (MAS) surprise policy announcement on Wednesday. -- PHOTO: BLOOMBERG

SINGAPORE - Interest rates here are expected to increase in tandem with those in the United States, regardless of the Monetary Authority of Singapore's (MAS) surprise policy announcement on Wednesday.

In a statement on Wednesday, Singapore's central bank said domestic interest rates have been low for several years, "reflecting extremely accommodative monetary policy globally".

Given an expected recovery in the US economy this year, the Federal Reserve has indicated that it will begin raising interest rates this year, and that the pace of increase is likely to be gradual.

This could lead to "some short-term volatility in the financial markets, reflecting uncertainties over the pace of interest rate normalisation and developments in the foreign exchange market", said the MAS.

However, Singapore has coped well with these developments and has not had to take extraordinary policy measures.

Rising interest rates could affect some firms and households, and the Government has put in place measures to help them adjust, the MAS said.

The Government will continue to monitor financing conditions for companies, and ensure that viable businesses have continued access to affordable loan financing.

MAS has also taken measures to encourage financial prudence among households, like the Total Debt Servicing Ratio (TDSR).

These moves aim to prevent borrowers from taking on excessive leverage for their property purchases, and reduce the impact of eventual interest rate hikes.

chiaym@sph.com.sg