SOR rises above 0.5% for the first time since June 2010, as the USD/SGD moves close to 1.3 again and LIBOR hit 0.54% on its continued steep incline, while SIBOR remains muted at 0.38%. The massive flight-to-safety from the Eurozone’s trouble pushes the US dollar higher as investors piled into Treasuries. This, the result of ECB’s stubborn unwillingness to print money, though, as widely expected, they did further cut rates by another quarter points to 1%.
Their American counterparts are, on the other hand, expected to start a new round of Quantitative Easing aka money printing, to cushion the weakening economy. Central banks around the world are also expected to reduce borrowing costs to help with the slowing economy. Just a wild guess, but this might explain the relatively lower SIBOR.
At this point, interest rates are still low by historical standards, so there should be little to worry about. The thing to worry about is probably inflation, which, relative to income, is becoming more and more significant, so much so that raising real incomes is highlighted as a key challenge for Singapore.
