How the Fed rate hike could weigh on Singapore
Investment and demand in other countries could take a hit if persistent US inflation keeps global borrowing costs high.
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The Fed’s move to raise interest rates has implications for other economies, including Singapore’s, says the writer.
ST PHOTO: LIM YAOHUI
Bernard Aw
After months of hoping price pressures would ease on their own, the US Federal Reserve has signalled that inflation is proving more stubborn than expected. On Sept 17, the Fed raised its benchmark interest rate by a quarter point – to between 3.75 per cent and 4 per cent – in a bid to rein in rising prices.
The latest projections suggest that inflation in the US will remain well above its 2 per cent target in 2026. This means that the US could keep its monetary policy tight for the foreseeable future and even raise rates further. This could have implications for Singapore and raise borrowing costs here.