SINGAPORE: Interest rates in the United States could stay unchanged because inflation has not improved enough.
US Federal Reserve chairman Jerome Powell said it would likely take longer than previously expected to gain the “greater confidence” needed to start cutting rates.
Singapore’s interest rates are determined by global rates and foreign exchange market expectations. That means broadly following the direction of other central banks, especially the US Fed.
So will savings accounts’ interest rates stay high?
Not necessarily, according to experts.
UOB and Standard Chartered Bank have already lowered the interest rates on their flagship savings accounts.
Banks make interest payments to those who deposit funds with them, and earn interest income from those who borrow money from them.
Some banks have more money than their customers want to borrow, which means they are not earning much interest income.
“They have challenges lending all this money out, because property transactions have slowed down,” said Mr Alfred Chia, chief executive officer of the SingCapital financial advisory.
“At the same time they have to fork out high interest payments.”
So banks that lower interest rates may be trying to reduce costs.
And as rates in the US stay high for longer, banks could continue to face the issue of having more funds than they can loan out, said Mr Chia.
But specifically for UOB, the decision to cut rates may not be due to the Fed or market expectations, said Mr Glenn Thum, senior research analyst at Phillip Securities Research.
It may instead be that the bank increased rates “too aggressively at the start”, he said.