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Explainer: Will the US Fed’s biggest interest rate hike since 1994 curb inflation and can it affect loans in S'pore?

People walk by the New York Stock Exchange on June 16, 2022 in New York City, a day after the Federal Reserve's largest rate hike since 1994.
People walk by the New York Stock Exchange on June 16, 2022 in New York City, a day after the Federal Reserve's largest rate hike since 1994.
The United States Federal Reserve (US Fed) on Wednesday (June 15) announced its largest interest rate increase since 1994, raising it by 0.75 percentage point.

This follows a similar move just last month, when the central bank hiked the benchmark interest rate by 0.50 percentage point — the biggest increase in more than two decades — as it tries to keep in check inflation that has soared to 40-year highs.

Economists who spoke to TODAY said that although the hawkish move may heighten worries about a looming recession, another concern in the more immediate horizon for people in Singapore would be the impact it has on loan interest rates here.

This would include all forms of borrowing such as student loans and personal loans, as they are likely to track the US interest rates, though the economists differ on how immediately or closely the increase here would follow that in America.

WHY HAS THE FED HIKED INTEREST RATES, AGAIN?

Economists told TODAY that the central bank’s aggressive move is basically it “playing catch up” to inflation in the wake of the post-Covid economic recovery.

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