“Policymakers remained reticent about the rate cut outlook in 2025, noting that the Federal Reserve is “significantly closer to neutral” and rate considerations from here onward would “need further progress toward 2% inflation”. Against this backdrop, the risk for 2025 is between the Fed cutting modestly and not cutting at all, says DBS Group Research in a Jan 20 report.
The outlook for interest rates in the region, particularly in Singapore, hinges on US inflation. On the surface, as Donald Trump begins his second term, the US economy has strengthened relative to its adversaries and partners. Whether China is an adversary or a partner remains unclear, but it is likely a mix of both.
Trump’s economic policies also remain uncertain, but the mixed signals from his campaign promises leave the interest rate outlook unclear. This uncertainty, however, creates opportunities for those nimble enough to capitalise on market fluctuations. As of January, the outlook is positive for banks but neutral to negative for S-REITs.
