Fed is going slow

We’re getting close to the end of the year, which is always a time of reflection. 

It’s also time to pick the word of the year, which some have suggested to be “inflation”.

The word that we’ve used the most in the past week is “interest rate”. 

Fed Chair Jerome Powell said that smaller interest rate increases could begin in December. 

The latest Singapore Savings Bonds (SSBs) are now offering a lower 10-year average interest rate of 3.26%. 

The good news is that banks are still raising interest rates on fixed deposit and savings account. 

DBS is offering an interest rate of 4.55% p.a. on USD fixed deposits. 

The RHB high yield savings plus account offers an interest rate of up to 5.5% p.a. on fresh funds deposited. 

To cap the week, the top-tier interest rate on the UOB One account was raised to 7.8% p.a.

We evaluate each of these options to determine if the high interest rates dangled are too good to be true.

🤔 To slow or not to slow

What happened? 

Jerome Powell suggested that the Fed could slow down the pace of rate hike in December to 0.50 percentage point. 

What does this mean?

With the economic impact of four consecutive “jumbo” rate hikes of 0.75 percentage points still not clearly seen, Powell thinks that it will be prudent to scale back rate hikes for now. 

His comments cemented economists’ expectations that the Fed will raise rates by 0.50 percentage point when it meets on 13-14 December. 

Why should I care?

The US market continued to grind higher after Powell's speech on increasing signs of a Fed pivot. With the further recovery this week, the S&P 500 index is now trading more than 13% higher compared to its lows in mid-October. 

However, the fight against inflation appears to be far from over. The latest payrolls data points to a jump in average hourly earnings of 0.6%, the most in nearly a year.

🚗 MOVING THIS WEEK

• CrowdStrike (CRWD) provided weak guidance for the upcoming quarter as customers delay purchases with an uncertain economy. The cautious warning led to a selloff in other cybersecurity stocks. 
• Xpeng expects to deliver between 20,000 to 21,000 cars in the fourth quarter, which could signal that deliveries in December will increase to 10,000 from under 6,000 units in November. 
• Pinduoduo (PDD) beat analyst revenue and profit expectations for its latest quarter as more Chinese consumers turn to online shopping with China's tight Covid policies.
• Singapore Airlines will be investing up to $1.24 billion for a 25.1% stake in Air India after Air India agreed to merge with Vistara, with an objective of building a stronger footing in the third-largest aviation market in the world.
• SATS will be raising up to S$800 million through a renounceable underwritten rights issue to partially finance its acquisition of air cargo handler Worldwide Flight Services (WFS). 

Source: Bloomberg, CNBC, Business Times, Edge Singapore

💡 THE BIG IMPORTANT STORY

UOB One interest rate at up to 7.8% p.a. Is it better than OCBC 360?

The UOB One account now offers an interest rate of up to 7.8% p.a. in the battle against OCBC 360 for the best deposit account in Singapore. 

🤓 WHAT WE’RE LOOKING OUT FOR THIS WEEK

• Wednesday, 7 Dec: SGX Academy webinar: How will S-REITs be impacted by rising interest rates?
• Thursday, 8 Dec: US initial jobless claims
• Friday: 9 Dec: Li Auto earnings

Source: SGX, Bloomberg, Refinitiv

🍭 THAT’S INTERESTING

Another World's First

Singapore and New York have emerged as the joint-most expensive cities to live in, according to the Economist Intelligence Unit's Worldwide Cost of Living report. The cost of living has risen by an average of 8.1% over the previous year in 172 of the world's largest cities, due to the Ukraine crisis and supply chain bottlenecks. 

Source: Bloomberg