CPI + 5.2%

[freedom]

What is MAS thinking?

can appreciated SGD directly reduce COE price?

can appreciated SGD directly drop Singapore mass market property price?

can appreciated SGD change the fact that we are using natural gas for power generation but pegging the electricity price to crude oil?

please raise the interest rate, rather than appreciate SGD.....

[shanrui_91]

I don't think they can raise interest rate, and neither do i think it will help.

COE prices - cutting from 1.5% to 0.5% in August is going to drive COE to sky-high even if the interest is at 5%

Property - ABSD ASSD, whatever measures and stamp duty also have already, Singapore is just too small for the population to keep growing.

Electricity - raising interest rate does not help either, unless they are going to change the way they peg to crude oil prices

Raise interest rate = SGD will appreciate even faster, hot money will flow in even stronger, leveraged property buyer preparing to commit suicide, relative return from stock market will fall, 5-years 10 years bonds and reits buyer will suffer. Only the conservative who put their money in bank will be happy

Neither monetary policy or exchange rate policy can save Singapore, it is down to basic supply and demand policies which seemed to have been too late to do anything now.

[freedom]

if interest rate rises to 5%, fewer people can afford the car or fewer banks will lend for you to buy a car, which will reduce the demand for COE.

The same is for property.

As for electricity, I can't believe the whole nation is punished for the mistake someone made long time ago.....

raising interest rate not necessary means SGD will appreciate, which is controlled by MAS. But continuing inflation will push SGD higher if MAS does not change its stance about appreciating SGD against inflation, which will attract more foreign money coming into SG and MAS is going to print more SGD, which will increase inflation further.....

[shanrui_91]

There will still be people buying car, some people just cannot live without it and some will not mind so long as they can pay in installment. The sharp supply cut is still the major reason driving coe prices. And then when coe price rises, deregistration rate also drops driving more supply cut. Cat A supply is expected to be cut by 2/3 after August while Cat B will be cut by 1/3.

As for property, those speculating will pull out from property, but some will never get their calculation right....

But if interest rate really rises to 5%, time to allocate more money to my saving account from stock. Risk-free rate of >5% (SGS) should be sufficient to counter against inflation.

[honeyclover]

If interest rate rises 5% = cost of borrowing will increase.
Cost of biz higher?
If really increase, then i have to sell majority of moi stocks, Financing all my loans will be tough. Deleveraging~

[dzwm87]

please raise the interest rate, rather than appreciate SGD.....

Let what Shanrui had mentioned, Singapore MAS does not have interest rate policy as its tool.. using Econs 101, this is so because Singapore is a small AND open economy. They are unable to affect global interest rates and they are affected by global interest rate changes. How then MAS mitigate inflationary pressure is with a manipulation of a basket of currency - having the SGD trading within a band (of which the band range is only to MAS knowledge).

Other alternatives include having the Singapore Govt to provide rebates, subsidies, etc while also tackling supply issues such as raising working productivity or curbing the recent property bubbles. Such effects, especially the latter has time lag and will take a while before it affects the market. In a nutshell, the alternative effects merely aims to either increase supply or lower the economy's aggregate demand - hence bringing down inflation..

On a side note regarding interest rates as an inflation-tackling tool. Bernanke has mentioned that one has to consider the root of the problem before using interest rate as a tool to tackle inflation. Increasing/lowering interest rate to tackle problems is, to Bernanke, akin to using a sledgehammer to kill a mosquito.

[freedom]

let's face it. current inflation is mainly domestic, rather than international, how could appreciating SGD tackle domestic inflation?

raising interest rate is the most effective way to remove liquidity from domestic market.

yes, singapore can't control rice price, crude oil price. but don't tell me that increase of COE is driven by foreign money. high HDB price is driven by foreign money. high private property price is driven only by foreign money. please don't count majority of PRs as foreign money, as most of PRs' money are earned and spent in Singapore, aka, it is SGD inflation.

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If interest rate rises 5% = cost of borrowing will increase.
Cost of biz higher?
If really increase, then i have to sell majority of moi stocks, Financing all my loans will be tough. Deleveraging~

honestly, IIRC, pre-2007, interest rate was always around 5% (borrowing).

[dzwm87]

let's face it. current inflation is mainly domestic, rather than international, how could appreciating SGD tackle domestic inflation?

Appreciated SGD makes SG exports more expensive while imports become cheaper. With a smaller net export or current surplus, the economy contracts since more 'money' is going out while less 'money' is being returned from the sales of SG exports.

What you are saying will only work in a closed economy.

[honeyclover]

Hmm currently, my loans average ard 4.75% pa.
If interest rate rises, wont bank loan interest rate increase?

[dzwm87]

honestly, IIRC, pre-2007, interest rate was always around 5% (borrowing).

http://www.tradingeconomics.com/singapore/interest-rate

I might be wrong but the historical chart shows the SIBOR not hitting 4% even in pre-2007.

Raising interest rates just to curb inflation will have an adverse effect if business conditions are not yet back to normalised optimistic terms.. and I don't think raising interest rates (even if it's possible) is the best to go given the current global conditions..