Low interest rate in Singapore

Dear Mr Tan,

Singapore bank deposit interest rates are, except for some short periods, mostly very low for the past years. I read that it is the 2nd lowest in the world after Japan. Many years ago, the rates were much more decent than now.

However, property, mortgage and loan rates, and more recently inflation, are high.

The low deposit rates are also affecting CPF interest rates which are pegged to it. It also discourages saving and also lures people to try those investment schemes (scams?) promising high rates.

Is it due to a huge influx of foreign money that depress the rates? Or what other likely causes and what will be the future trend of the rates?

I think the issues are not simple but I hope you can share some views and analysis on this in your blog.

REPLY

I agree with you on the following points:

1. Interest rate is too low in Singapore
2. It lures people to investment schemes (scams) that promise high returns.
3. It is probably due to the influx of foreign funds.

Some investment analysts said that the Singapore dollar could be used to fund the "carry trade", similar to the Japanese yen. So far, this has not happened. We have to keep a watch on this possible development.