US Fed fund rate from 1954 to 2009 ...... if the peak of US glorious day was over ... you will expect the rate to stay near zero similar to Japan as US runs out of weapons that can drive growth (1998-2000 was NASDAQ boom, 2004-2008 was sub-prime boom)
Singapore interest rate has high correlation with US Fed rate except when there is local event that results in extreme swing (e.g. 1997 Asian currency crisis)
US Fed has indicated that US Fed rate will not go up till at least 2014 ....however, this time around US seems to run out of idea on how to re-inflate its economy out of shit and the Euro-crisis only added to its burden
So potentially US Fed rate could stay near zero for 10y, 15y, 20y. This will spell big trouble for Singapore. As long as Singapore continues to deliver moderate growth, inflation will stay high but SIBOR will stay at 0.4% for many years to come. Middle class will be harmed the most since they normally have cash savings all in the bank while upper middle class / the rich can diversify and stay invested. Due to fear of money losing value, lots of people may also invest in property market (especially MMs) and result in huge bubble.
Do you think Singapore can ever change its financial system to unpeg from US Fed rate?? Since nobody has ever suggested this in the press, this must be a very difficult change and may have serious implication.
How would all these end? This must be the most confusing era in our lifetime![]()