After pausing in June, the Federal Reserve has resumed raising interest rates during the latest Federal Open Market Committee meeting. The committee increased the fed funds target rate by 0.25%, setting a new range of 5.25% to 5.5%, the highest since early 2001. This marks the 11th rate increase since the Fed started tightening monetary policy in March 2022. In response to declining U.S. inflation, the central bank halted its campaign at the June FOMC meeting. The Fed also stated its intention to allow up to $60 billion in Treasury securities and $35 billion in agency mortgage-backed securities to mature each month, contributing to the ongoing effort to control inflation. After a year of high inflation due to factors like pent-up consumer demand and supply chain disruptions, the FOMC has been increasing rates to target its 2% inflation goal. With recent months seeing a decline in inflation, there is optimism that the current cycle's terminal interest rate has been reached, although some economists suggest the possibility of one more rate increase before the end of 2023.
As a realtor in Singapore, it's important to note that Singapore's mortgage interest rates are influenced by the US Federal Reserve's interest rate decisions. Currently, markets are pricing in a 20% probability of the Fed raising interest rates at its next meeting in September. However, this could change based on economic data over the next seven weeks. The recent Federal Open Market Committee (FOMC) statement didn't clearly indicate the Fed's next move, but it kept the possibility of another rate hike open if inflation remains high. Investors will closely monitor key economic indicators such as the preliminary second-quarter US GDP growth estimate and the upcoming earnings reports of tech giants like Meta Platforms, Advanced Micro Devices, Amazon, and Apple. The Fed's actions and economic developments in the US could potentially impact mortgage rates in Singapore tied to the US Fed's interest rate decisions.
Some snippets of facts:
- Who is the FOMC and why is it important?
The Federal Open Market Committee (FOMC) is a group of 16 individuals in important financial roles. They meet 8 times a year to decide on interest rates and policies. - What are FOMC members predicting for future interest rates?
According to the latest Monetary Policy Report in June 2023, most FOMC members suggest interest rates might change to around 4.x% in 2024, 3.x% in 2025, and 2.x% in the long run. - How can I plan for buying or upgrading my property during high interest rates?
Remember, high interest rates won't last forever. But even if rates go down, Government rules might still make it harder to buy a condo later. Plus, as we get older, our loan time decreases, meaning higher monthly payments
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In this time, it's also why New Launches are selling as progressive payment are not as affected by the relatively high interest rate.