View Full Version : US Federal Reserve raises interest rates to 1% in bid to hold off inflation
Speculators and overstretched homeowners die pain pain ah :biggrin-new::tongue3::sleep:
The time has also come for quick unwind of (mostly property) funds.
Wow good news, US is recovering Property Price going up soon.
Interest rates and house prices do not exist in a vacuum and both are influenced by the overall strength or weakness of our broader economy.
Rising interest rates generally occur in a healthy economic environment where future price inflation is expected, making them a by-product of positive economic momentum.
While it certainly is true that higher rates increase borrowing costs, this generally happens in periods with rising incomes, higher levels of employment and increasing consumer confidence. To take our contrarian thinking to its logical conclusion, we should all be rooting for higher interest rates.
Seriously. Rock bottom rates are sustained when concern over inflation is replaced by fears of disinflation and outright deflation.
Higher rates, on the other hand, are a sign of increasing confidence in our future economic prospects.
With rate raising more reasons to remove cooling measures.
Finally return to normalcy.
We have already adjusted due to TDSR in 2013.
Interestingly, just witnessed USD decline in value to SGD overnight.
http://www.straitstimes.com/business/economy/10-things-you-should-know-about-singapores-monetary-policy
One possible outcome is for US rate rise to coincide to an extent with the appreciation in SGD value without influencing interest rates significantly, although this could cause our products and services to become costlier and affect competitiveness as a country.
But it could also induce speculation in SG properties from global investors with the appreciation in SGD (to an extent)...
PropVestor
16-03-17, 11:06
I think bringing interest rates to 3-5% levels is a sign that the global economy is sustainable and healthy. Cheap money lasting 10 years is not a good sign and hopefully we do not reach that kind of length. I am more concerned about consumer psychology of what is norm will start to get warped especially for the young millennials who think 1-2% interest rates is 'normal and sustainable'. This forms a dangerous bubble of taking cheap and dangerous loans without anticipating future, aggressive hikes. You will question, what is the new normal? When reality hits them, getting used to 5% rates will be really tough for them. This will adversely affect the demand of property in the long run as they will be the likely new owners whom we will sell to in the future. Bearing in mind, CMs will not be here to stay as interest rates go north. This is now the intricate balance against external economic factors.
MAS interest rate adjustment is anticipatory which is reflective of our current rates of 1.25% to 2+% some of us are paying. This is necessary so that we are cushioned against any psychological shocks from external market forces.
2 cents,
PropVestor
If economic growth is at 2 plus%, CPF OA is at 2 plus%, SSB is at max 2 plus%, bank deposits pay not more than 1 plus%, how can interest rate of banks go beyond 3%?
I think bringing interest rates to 3-5% levels is a sign that the global economy is sustainable and healthy. Cheap money lasting 10 years is not a good sign and hopefully we do not reach that kind of length. I am more concerned about consumer psychology of what is norm will start to get warped especially for the young millennials who think 1-2% interest rates is 'normal and sustainable'. This forms a dangerous bubble of taking cheap and dangerous loans without anticipating future, aggressive hikes. You will question, what is the new normal? When reality hits them, getting used to 5% rates will be really tough for them. This will adversely affect the demand of property in the long run as they will be the likely new owners whom we will sell to in the future. Bearing in mind, CMs will not be here to stay as interest rates go north. This is now the intricate balance against external economic factors.
MAS interest rate adjustment is anticipatory which is reflective of our current rates of 1.25% to 2+% some of us are paying. This is necessary so that we are cushioned against any psychological shocks from external market forces.
2 cents,
PropVestor
I think bringing interest rates to 3-5% levels is a sign that the global economy is sustainable and healthy. Cheap money lasting 10 years is not a good sign and hopefully we do not reach that kind of length. I am more concerned about consumer psychology of what is norm will start to get warped especially for the young millennials who think 1-2% interest rates is 'normal and sustainable'. This forms a dangerous bubble of taking cheap and dangerous loans without anticipating future, aggressive hikes. You will question, what is the new normal? When reality hits them, getting used to 5% rates will be really tough for them. This will adversely affect the demand of property in the long run as they will be the likely new owners whom we will sell to in the future. Bearing in mind, CMs will not be here to stay as interest rates go north. This is now the intricate balance against external economic factors.
MAS interest rate adjustment is anticipatory which is reflective of our current rates of 1.25% to 2+% some of us are paying. This is necessary so that we are cushioned against any psychological shocks from external market forces.
2 cents,
PropVestor
Agree, when interest rate become 3 to 5 % property price should be cheaper due to cheaper money to loan by the developer to build property, cheaper to employ and cheaper to buy material to build. Property in the long run will become cheaper. Those with property now will be worst off when interest rate increase to 3 to 5 %.
Money in the Bank should earn better interest, CASH is King.
PropVestor
16-03-17, 16:19
If economic growth is at 2 plus%, CPF OA is at 2 plus%, SSB is at max 2 plus%, bank deposits pay not more than 1 plus%, how can interest rate of banks go beyond 3%?
Take a look at the historical charting of interest rate from 1988 to 2017 (till date). It is now artificially depressed due to the Great Depression of 2008. MAS kept it low to encourage lending and business activity in such gloomy times. I personally think this is not sustainable for a healthy business environment as cheap money will run out eventually which we are seeing the initial steps of it.
http://www.tradingeconomics.com/singapore/interest-rate
I quote:
"The benchmark interest rate in Singapore was last recorded at 0.22 percent. Interest Rate in Singapore averaged 1.66 percent from 1988 until 2017, reaching an all time high of 20 percent in January of 1990 and a record low of -0.75 percent in October of 1993."
If you wish for more than 10% interest rates, you can still find them in places like Indonesia.
Or other emerging Asian economies where you might get 6-8%. Are their properties cheap? Yes. Are the prices dropping? Hell, no! Why?
But there are very good reasons why developed Asian countries like SG and Japan have sub 2% interest rates, maybe even sub 1%.
Take a look at the historical charting of interest rate from 1988 to 2017 (till date). It is now artificially depressed due to the Great Depression of 2008. MAS kept it low to encourage lending and business activity in such gloomy times. I personally think this is not sustainable for a healthy business environment as cheap money will run out eventually which we are seeing the initial steps of it.
http://www.tradingeconomics.com/singapore/interest-rate
I quote:
"The benchmark interest rate in Singapore was last recorded at 0.22 percent. Interest Rate in Singapore averaged 1.66 percent from 1988 until 2017, reaching an all time high of 20 percent in January of 1990 and a record low of -0.75 percent in October of 1993."
If you wish for more than 10% interest rates, you can still find them in places like Indonesia.
Or other emerging Asian economies where you might get 6-8%. Are their properties cheap? Yes. Are the prices dropping? Hell, no! Why?
But there are very good reasons why developed Asian countries like SG and Japan have sub 2% interest rates, maybe even sub 1%.
Hong Kong and South Korea also similar interest rate profile.
With rate raising more reasons to remove cooling measures.
The opposite is true. Prices are rising so I think overstretched homeowners are in for the long haul.
With TDSR want to overstretched also got the problem, moreover, TDSR was adjusted twice to help so call overstretched.
Durian drop waits, Durian don't drop complain.
How many 10 years can one person have?
With TDSR want to overstretched also got the problem, moreover, TDSR was adjusted twice to help so call overstretched.
Durian drop waits, Durian don't drop complain.
How many 10 years can one person have?
Very true indeed.
https://www.facebook.com/TheMerlionPress/videos/423587261313626/?hc_ref=NEWSFEED
It was like yesterday I took the photo at the then Black color Singapore River and going back to Singapore Technical Institute to develop the picture in the dark room in 1983.
US rate raise will only cause USD to rise and ultimately SGD to fall vs USD................
The reason why US rate rise will be slow is to prevent USD from rising too fast!
Time will tell but this ultimate fundamental principle has always hold true, just like object will always fall to the ground if dropped from the air and never the other way round...............
Interestingly, just witnessed USD decline in value to SGD overnight.
http://www.straitstimes.com/business/economy/10-things-you-should-know-about-singapores-monetary-policy
One possible outcome is for US rate rise to coincide to an extent with the appreciation in SGD value without influencing interest rates significantly, although this could cause our products and services to become costlier and affect competitiveness as a country.
But it could also induce speculation in SG properties from global investors with the appreciation in SGD (to an extent)...
US rate raise will only cause USD to rise and ultimately SGD to fall vs USD................
The reason why US rate rise will be slow is to prevent USD from rising too fast!
Time will tell but this ultimate fundamental principle has always hold true, just like object will always fall to the ground if dropped from the air and never the other way round...............
Before 2008 yes but not after 2008.
The Whole World already in the printing mode, don't need interest rate to control. Abe is good in this.
Control interest rate has nothing to do with controlling Exchange Rate, I hope you understand this, although it tends to have the effect of affecting Exchange Rate...........
Abe don't even dare to rise rate because then Yen will rise vs other currencies, same like US rate rise and USD will ultimately rise vs other currencies (whose rate do not rise)...............
Before 2008 yes but not after 2008.
The Whole World already in the printing mode, don't need interest rate to control. Abe is good in this.
Control interest rate has nothing to do with controlling Exchange Rate, I hope you understand this, although it tends to have the effect of affecting Exchange Rate...........
Abe don't even dare to rise rate because then Yen will rise vs other currencies, same like US rate rise and USD will ultimately rise vs other currencies (whose rate do not rise)...............
Yes, this is true.. My view is if SGD vs USD remains strong, maybe the SIBOR will not move much UP... In any case, interest rate is considered low for so long. I have taken advantage by leveraging it to the max. Dont really have to invest in property, there are others type of investment though I personally prefers property.
US rate raise will only cause USD to rise and ultimately SGD to fall vs USD................
The reason why US rate rise will be slow is to prevent USD from rising too fast!
Time will tell but this ultimate fundamental principle has always hold true, just like object will always fall to the ground if dropped from the air and never the other way round...............
http://www.thestar.com.my/news/nation/2017/03/19/chinas-capital-controls-start-biting-projects-with-chinese-investments-in-malaysia-however-are-still/#HQzgWp7rWJ7Z9wxZ.99
http://www.thestar.com.my/news/nation/2017/03/19/chinas-capital-controls-start-biting-projects-with-chinese-investments-in-malaysia-however-are-still/~/media/454f7e28f028494c8c070b18181dfad4.ashx?h=428&w=600
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