Singapore Bank: If the Federal Reserve believes that tariffs will not lead to stagflation, there may be only one interest rate cut this year
The Chief Economist of Singapore Bank, Moman Su, stated that if the Federal Reserve believes that tariffs will not lead to stagflation, it is expected to cut interest rates only once this year. The Federal Reserve kept interest rates unchanged and expects two rate cuts in 2025. Despite the increasing uncertainty in the economic outlook, investors are still advised to increase their holdings in stocks, cautiously hold long-term bonds, and be bearish on the US dollar. In the coming months, unless the US economy stagnates, the yield on 10-year US Treasury bonds is unlikely to fall below the range of 4% to 5%
According to the Zhitong Finance APP, the Chief Economist of Singapore Bank, Mohamadou, stated that the Federal Reserve maintained the federal funds rate unchanged in the range of 4.25% to 4.50%, as the market expected. The Federal Open Market Committee of the Federal Reserve still anticipates two rate cuts in 2025, and Powell further indicated that the economy remains healthy. The United States will release a trade policy review report on April 2, and if the Federal Reserve believes that tariffs will not lead to stagflation, it is expected to cut rates only once this year.
The Federal Reserve's statement, economic forecasts, and comments from Chairman Powell all show a dovish tendency, reflecting the risk that the U.S. may further increase tariffs. Mohamadou believes that the Federal Open Market Committee's statement indicates that uncertainty regarding the economic outlook has increased, while also lowering economic growth forecasts, and Powell downplayed inflation threats. Despite a more moderate stance, the Federal Reserve has not signaled any imminent rate cuts.
Mohamadou stated that despite the increased uncertainty, investors should continue to increase their holdings in stocks, cautiously hold long-term bonds, and remain bearish on the dollar. In the coming months, unless U.S. economic growth stagnates, prompting investors to seek strong safe havens and actively buy U.S. Treasuries, the yield on 10-year U.S. Treasuries is unlikely to fall below the range of 4% to 5%. Conversely, Singapore Bank's baseline scenario still expects the U.S. economy to achieve a soft landing, and the yield on U.S. Treasuries will rise in 2025