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Economic News
- Thread starter FHBH12
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Fed Ends Zero-Rate Era; Signals 4 Quarter-Point Increases in 2016
Christopher Condon Craig Torres
December 17, 2015 — 3:00 AM SGT Updated on December 17, 2015 — 5:40 AM SGT
The Federal Reserve raised interest rates for the first time in almost a decade, a widely telegraphed move that Chair Janet Yellen said would be followed by “gradual” tightening as officials watch for evidence of higher inflation.
The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.
“The economic recovery has clearly come a long way, although it is not yet complete,” Yellen told a press conference following the conclusion of the FOMC’s two-day meeting in Washington. “The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.”
The increase draws to a close an unprecedented period of record-low rates that were part of extraordinary and controversial Fed policies designed to stimulate the U.S. economy in the wake of the most devastating financial crisis since the Great Depression. The FOMC lowered its benchmark rate to near zero in December 2008, three months after the collapse of investment bank Lehman Brothers Holdings Inc. and 10 months before unemployment in the U.S. peaked at 10 percent.
Inflation Outlook
"The one phrase that I think is notable is that the committee is confident that inflation will rise, and that was the key criterion that changed," said Guy LeBas, managing director and chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.
The Standard & Poor’s 500 Index of U.S. stocks jumped 1.5 percent to 2,073.07 in New York, rising for three consecutive days for the first time since October while erasing losses for the year. The dollar fluctuated against the euro after the decision, falling as much as 0.7 percent. It later recouped losses, climbing 0.3 percent to $1.0902 per euro as of 4:14 p.m. in New York.
While the vote was unanimous, the rate forecasts show that two officials among the full group of voters and non-voters saw no rate increases as appropriate in 2015, without identifying them.
“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” the FOMC said. “The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”
Balance Sheet
The FOMC said it expects to maintain the size of its balance sheet “until normalization of the level of the federal funds rate is well under way.”
The quarter-point increase in the target fed funds rate, the overnight interbank lending rate that influences other borrowing costs in the economy, was forecast by 102 of 105 analysts surveyed by Bloomberg News.
The Fed gave a largely positive assessment of the U.S. economy, saying that expansion continued at a “moderate pace” and that a “range” of job-market indicators “confirms that underutilization of labor resources has diminished appreciably since early this year.”
The central bank also said that the risks to the outlook for economic activity and the labor market are now “balanced,” changing from a previous reference to being “nearly balanced.”
Sustainable Improvement
“Americans should realize that the Fed’s decision today reflects our confidence in the U.S. economy,” Yellen said. “While things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement.”
Still, the recovery has been disappointing for many. Household incomes remain lower than they were a decade ago when adjusted for inflation, and wages have climbed only sluggishly even as firms hired back workers. Hourly earnings have risen by about an average 2.2 percent annual pace over the past seven years, compared with 3.3 percent in the 20 years through 2008.
The Fed said monetary policy is still “accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”
The central bank acknowledged the state of low inflation, saying that it plans to “carefully monitor actual and expected progress toward” its 2 percent target.
As part of the decision, the Fed increased the interest it pays on overnight reverse repos to 0.25 percent from 0.05 percent to put a floor at the lower end of the range. It also raised the interest it pays on excess reserves held at the Fed to 0.5 percent from 0.25 percent to mark the upper end of the range.
In a related move, the Fed’s Board of Governors unanimously voted to raise the discount rate, which covers direct loans to banks, by a quarter point to 1 percent.
In addition to setting rock-bottom short-term interest rates during the crisis, the Fed engaged in three rounds of bond purchases aimed at suppressing long-term rates to stimulate borrowing and spending. Officials also provided unusually explicit guidance, assuring investors for years they intended to keep rates low well into the future.
Prior to 2008, the effective fed funds rate had never dropped below 0.63 percent, according to data compiled by the St. Louis Fed dating back to 1954.
http://www.bloomberg.com/news/artic...te-era-signals-4-quarter-point-2016-increases
Christopher Condon Craig Torres
December 17, 2015 — 3:00 AM SGT Updated on December 17, 2015 — 5:40 AM SGT
The Federal Reserve raised interest rates for the first time in almost a decade, a widely telegraphed move that Chair Janet Yellen said would be followed by “gradual” tightening as officials watch for evidence of higher inflation.
The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials.
“The economic recovery has clearly come a long way, although it is not yet complete,” Yellen told a press conference following the conclusion of the FOMC’s two-day meeting in Washington. “The committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.”
The increase draws to a close an unprecedented period of record-low rates that were part of extraordinary and controversial Fed policies designed to stimulate the U.S. economy in the wake of the most devastating financial crisis since the Great Depression. The FOMC lowered its benchmark rate to near zero in December 2008, three months after the collapse of investment bank Lehman Brothers Holdings Inc. and 10 months before unemployment in the U.S. peaked at 10 percent.
Inflation Outlook
"The one phrase that I think is notable is that the committee is confident that inflation will rise, and that was the key criterion that changed," said Guy LeBas, managing director and chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.
The Standard & Poor’s 500 Index of U.S. stocks jumped 1.5 percent to 2,073.07 in New York, rising for three consecutive days for the first time since October while erasing losses for the year. The dollar fluctuated against the euro after the decision, falling as much as 0.7 percent. It later recouped losses, climbing 0.3 percent to $1.0902 per euro as of 4:14 p.m. in New York.
While the vote was unanimous, the rate forecasts show that two officials among the full group of voters and non-voters saw no rate increases as appropriate in 2015, without identifying them.
“The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” the FOMC said. “The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”
Balance Sheet
The FOMC said it expects to maintain the size of its balance sheet “until normalization of the level of the federal funds rate is well under way.”
The quarter-point increase in the target fed funds rate, the overnight interbank lending rate that influences other borrowing costs in the economy, was forecast by 102 of 105 analysts surveyed by Bloomberg News.
The Fed gave a largely positive assessment of the U.S. economy, saying that expansion continued at a “moderate pace” and that a “range” of job-market indicators “confirms that underutilization of labor resources has diminished appreciably since early this year.”
The central bank also said that the risks to the outlook for economic activity and the labor market are now “balanced,” changing from a previous reference to being “nearly balanced.”
Sustainable Improvement
“Americans should realize that the Fed’s decision today reflects our confidence in the U.S. economy,” Yellen said. “While things may be uneven across regions of the country and different industrial sectors, we see an economy that is on a path of sustainable improvement.”
Still, the recovery has been disappointing for many. Household incomes remain lower than they were a decade ago when adjusted for inflation, and wages have climbed only sluggishly even as firms hired back workers. Hourly earnings have risen by about an average 2.2 percent annual pace over the past seven years, compared with 3.3 percent in the 20 years through 2008.
The Fed said monetary policy is still “accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”
The central bank acknowledged the state of low inflation, saying that it plans to “carefully monitor actual and expected progress toward” its 2 percent target.
As part of the decision, the Fed increased the interest it pays on overnight reverse repos to 0.25 percent from 0.05 percent to put a floor at the lower end of the range. It also raised the interest it pays on excess reserves held at the Fed to 0.5 percent from 0.25 percent to mark the upper end of the range.
In a related move, the Fed’s Board of Governors unanimously voted to raise the discount rate, which covers direct loans to banks, by a quarter point to 1 percent.
In addition to setting rock-bottom short-term interest rates during the crisis, the Fed engaged in three rounds of bond purchases aimed at suppressing long-term rates to stimulate borrowing and spending. Officials also provided unusually explicit guidance, assuring investors for years they intended to keep rates low well into the future.
Prior to 2008, the effective fed funds rate had never dropped below 0.63 percent, according to data compiled by the St. Louis Fed dating back to 1954.
http://www.bloomberg.com/news/artic...te-era-signals-4-quarter-point-2016-increases
Lucky I recently refinanced, and had asked my siblings and Johor kakis with SG property loans to do so too a few months ago
How were your new rates...Mine is one loan at 1.25%, 1.45% and 1.55% for 3 years fixed with Maybank and another at 1.98% fixed for 2 years with OCBC(a smaller amount which we could not reprice till recently as loan not fully disbursed)...the latter just approved yesterday fortunately...
Mine is FHR+1.2 for three years starting from this year (effectively 1.6%), and FHR+1.6 thereafter (effectively 2.0%), assuming FHR stays at 0.4% (likely to increase slightly end of next year). I already enjoyed some savings when I refinance.
For fixed rate, there is usually a slight upfront premium and if you refinance, you could be hit with a much higher rate. By end 2016, my guess is Sibor could go up to 1.5-1.7%. Those on SOR will be worse.
Singapore interest rates rise ahead of Fed's decision
Published Dec 15, 2015, 5:00 am SGT
Cost of lending going up for mortgage holders and business owners in Singapore
SINGAPORE - Local interest rates are inching up and investors are on edge as the countdown to Thursday's decision by the United States Federal Reserve begins in earnest.
It is widely expected that the Fed will raise interest rates from near-zero levels - the first such rise in nine years - and the effects are already rippling through Singapore's financial and currency markets.
The greenback has strengthened against the Singdollar. More importantly, for mortgage holders and business owners, the cost of lending is going up.
The three-month swap offer rate (SOR), a benchmark for commercial loans and some home loans, spiked to a new three-month high of 1.59168 per cent yesterday from 1.50597 per cent last Friday and 1.39520 per cent on Thursday. The previous high was at 1.56409 per cent on Sept 8.
It is now almost four times higher than at this time last year.
It is a similar story with the three-month Singapore interbank offered rate (Sibor). The Sibor, which is used extensively to price home loans, hit a two-month high of 1.12865 per cent yesterday and is now almost three times higher than its level 12 months ago.
This means the monthly repayments on a $500,000 loan with a 25-year period pegged to Sibor will be $168 more than a year ago, while one pegged to the three-month SOR will be $262 more.
The US rate hike has been flagged for several months, during which a rising number of home owners have switched to fixed-rate mortgages, and a new product pegged to fixed deposit rates was launched.
SOR loans became popular around 2010-2011, when SOR started to dip below Sibor.
Most home loans extended by DBS Bank, Singapore's largest provider of mortgages, are pegged to Sibor, with fewer than 500 based on SOR, said Mr Tok Geok Peng, its executive director of secured lending.
Personal finance portal MoneySmart.sg estimates that 45 per cent of mortgages are pegged to fixed deposit rates, 50 per cent to Sibor and the remainder to SOR, based on loan take-ups in the past two months.
ABN Amro chief economist Han de Jong noted that this will "undoubtedly be one of the best flagged rate increases ever, so it is hard to see how people can be caught off guard, but you never know".
DBS Bank economist Eugene Leow said: "We expect a 25-basis point hike but much of this has already been priced into the market.
"We suspect that Sibor and SOR rates will likely rise by a smaller magnitude than US rates."
DBS sees Sibor at 1.4 per cent by the first quarter next year.
The rate talk has also hit stocks and currencies as investors wait on the sidelines for a decision. The US dollar rose from 1.4095 to the Singdollar last Friday to 1.4129 yesterday while local share investors, who seem determined to keep their powder dry until later in the week, left the benchmark Straits Times Index down 0.69 per cent yesterday.
http://www.straitstimes.com/business/economy/local-interest-rates-rise-ahead-of-feds-decision
It is for private properties too.
I see, my banker seems to say only for HDB. Thanks
If you have fully paid up properties, it should not be a concern.
Property owners who are still on loan need to be careful of higher interest rates of 3-4% ahead in next 3 years from 1-2% currently.
I don't think Malaysia will raise interest rates so soon. In Singapore, the Sibor and SOR rates increase several months ahead of actual Fed increase.
My significant half has a private property on loan she managed to get fixed rate loan earlier this year.
It's confirmed for private properties too. Many of my friends are opting for this package, including myself. But since its floating, you can only save on a few years of interest, say 2 or 3 years. Eventually FHR packages will catch up when its time to reprice/refinance after 3 years.
Those overleveraged, beware!
Very true. Looks like the property market will be in for a tight squeeze.
Most should have refinanced by now.
But looking forward is not so clear.
By right interest rates should only increase when the market is starting to get frothy but nowadays seems like it's not the case
Most should have refinanced by now.
But looking forward is not so clear.
By right interest rates should only increase when the market is starting to get frothy but nowadays seems like it's not the case
Malaysia to review Budget 2016 if oil prices continue to stay low
Thursday, Dec 17, 2015
KUALA LUMPUR: Minister in Prime Minister's Department Datuk Seri Wahid Omar says the government will review Budget 2016 if oil prices continue to stay low.
The government had planned for the Budget based on the assumption that Brent crude would average at US$48 per barrel for next year but at midday on Thursday, it was trading around US$37 per barrel.
"The government will need to optimise the country's expansion plan if oil prices continue to stay low," he said. That includes reviewing some of the projects it has announced.
Wahid also said the government would continue to support the growth of businesses and companies to ensure any potential impact on the economy would be cushioned should oil prices stay at the current low level.
"We saw that through 2008 and 2009 but most companies remained operational and people continue to have jobs," he added.
He also said the Malaysia's fundamentals remain strong as the country have diversified resources, export markets and income stream from other industries besides oil and gas.
But he was hopeful that oil prices will recover next year and declined to comment on when that could happen. Oil prices tumbled from US$100 in mid-2014.
On the US Federal Reserve's rate hike, he said it came in within expectations.
"Based on the tone of the Fed, it should be gradual and will be more towards normalisation," he added.
On whether Malaysia would adjust its overnight policy rate (OPR) following the US rate hike, he was non-committal to a figure but noted the OPR was accommodative for investments at 3.25 per cent.
He expected the ringgit to be at 4.20 against the US dollar next year.
- See more at: http://news.asiaone.com/news/malays...prices-continue-stay-low#sthash.biXTbML4.dpuf
Thursday, Dec 17, 2015
KUALA LUMPUR: Minister in Prime Minister's Department Datuk Seri Wahid Omar says the government will review Budget 2016 if oil prices continue to stay low.
The government had planned for the Budget based on the assumption that Brent crude would average at US$48 per barrel for next year but at midday on Thursday, it was trading around US$37 per barrel.
"The government will need to optimise the country's expansion plan if oil prices continue to stay low," he said. That includes reviewing some of the projects it has announced.
Wahid also said the government would continue to support the growth of businesses and companies to ensure any potential impact on the economy would be cushioned should oil prices stay at the current low level.
"We saw that through 2008 and 2009 but most companies remained operational and people continue to have jobs," he added.
He also said the Malaysia's fundamentals remain strong as the country have diversified resources, export markets and income stream from other industries besides oil and gas.
But he was hopeful that oil prices will recover next year and declined to comment on when that could happen. Oil prices tumbled from US$100 in mid-2014.
On the US Federal Reserve's rate hike, he said it came in within expectations.
"Based on the tone of the Fed, it should be gradual and will be more towards normalisation," he added.
On whether Malaysia would adjust its overnight policy rate (OPR) following the US rate hike, he was non-committal to a figure but noted the OPR was accommodative for investments at 3.25 per cent.
He expected the ringgit to be at 4.20 against the US dollar next year.
- See more at: http://news.asiaone.com/news/malays...prices-continue-stay-low#sthash.biXTbML4.dpuf
According to a NGO counsellor from Tsao Foundation, Chan Wai Ping, elderly people are turning to suicide to end their pain and struggles. In Singapore, tens of thousands of elderly Singaporeans live in extreme poverty living in rented housing and being malnourished. In 2011, Tan Tock Seng Hospital released a survey finding revealing that 1 in 3 elderly Singaporeans are not eating right, with a lack of vital nutrition like calcium, fibre and iron.
Employment for elderly Singaporeans are mostly low income and labour jobs like cleaners and security guards. Others who are unemployable will take to the streets collecting cardboards earning $6 a day or begging on the streets selling tissue paper.
The Singapore’s Central Provident Fund is insufficient to meet retirement needs and there is no Minimum Wage or welfare to ensure a social safety net for elderly in Singapore. The Singapore government however refuses to acknowledge poverty-related problems with the Minister of Social and Family Development (MSF) once referring the cardboard collecting to “exercising”.
http://statestimesreview.com/2015/1...mitting-suicides-to-end-poverty-and-hardship/
Employment for elderly Singaporeans are mostly low income and labour jobs like cleaners and security guards. Others who are unemployable will take to the streets collecting cardboards earning $6 a day or begging on the streets selling tissue paper.
The Singapore’s Central Provident Fund is insufficient to meet retirement needs and there is no Minimum Wage or welfare to ensure a social safety net for elderly in Singapore. The Singapore government however refuses to acknowledge poverty-related problems with the Minister of Social and Family Development (MSF) once referring the cardboard collecting to “exercising”.
http://statestimesreview.com/2015/1...mitting-suicides-to-end-poverty-and-hardship/
In Singapore got no poverty or poor people, only lower income group. Duh...
This article is playing the sentiments of the citizens to hate the government.
What the article has done is to focus on the very poor and then slam the government for being ruthless.
There is no country in the world without beggars and homeless people. If one has traveled overseas enough, he will know that scenes of people begging in the streets in 1st world countries are more common than Singapore.
Question: Where will the money for welfare come from?
Answer: Tax payers like you and me. The middle class will be hit hardest. We are starting to tap on our reserves. Taxes are projected to rise to cope with rising social costs.
The holistic approach to social engineering is missing. Somehow the rat race had lost its way.
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