USD/SGD scales 7 1/2-month peak as Fed flags slower easing

The USD/SGD currency pair traded in proximity to a fresh 7 1/2-month high of 1.3634 on Thursday, after the Federal Reserve signaled fewer rate cuts in 2025 due to robust GDP growth and persistent inflation.

The central bank’s dot plot projections showed just two interest rate cuts next year, totaling 50 basis points. That compares with 100 basis points of rate cuts projected in the third quarter.

The Fed reduced its federal funds rate target range by 25 basis points to 4.25%-4.50% at its December meeting, in line with market consensus.

The US central bank revised up its 2024 GDP growth forecast to 2.5% from 2% in the September projection. And, the 2025 forecast was raised to 2.1% from 2% previously.

In addition, annual core PCE inflation forecasts were also revised up, as follows:

– for 2024 – to 2.8% from 2.6%;
– for 2025 – to 2.5% from 2.2%;
– for 2026 – to 2.2% from 2% in the September projection.

Market players are now expecting the US GDP and PCE inflation reports this week for more clues on the Fed’s monetary policy path.

The USD/SGD currency pair was last edging down 0.30% on the day to trade at 1.3581.