Banks can ‘grind higher’ amidst FFR hike, border reopening: RHB

Singapore’s benchmark interest rates have risen since the start of the year.

Banks in the Lion City may expect to grind higher in the next few months on the back of the rise in federal funds rate (FFR) and border reopening that would cause recovery in economic activities, according to Malaysia-based financial services group, RHB.

RHB also noted that there are four rate hikes in the financial year 2022 earnings.

The Federal Open Market Committee (FOMC) dot plot indicated that officials are expecting to raise FFR six more times in 2022. The dot plot is where the US central bank signals its outlook path of interest rates.

Singapore’s benchmark interest rates, which tie into the movements in the FFR, have risen since the start of 2022.

The dot plot also suggested that Singapore benchmark rates would increase sharply in 2022 which will be followed by a moderate rise in 2023. 

In contrast, RHB said the rates would likely remain lower than levels seen back in 2006 to 2007.

With this, RHB projected that higher interest rates will be well-absorbed by the market, helped by improving economic prospects within the region.

RHB then said Singapore Banks are “guiding for mid single-digit loan growth in financial year 2022, moderating from the high single-digit increase in financial year 2021.”