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Uncertainty over Fed rate hike becoming too costly for markets: Tharman

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Uncertainty brought about by anticipation over when the US Federal Reserve is going to raise interest rates is becoming too much of a cost for markets to bear, said Singapore's Deputy Prime Minister Tharman Shanmugaratnam on Friday

UNCERTAINTY brought about by anticipation over when the US Federal Reserve is going to raise interest rates is becoming too much of a cost for markets to bear, said Singapore's Deputy Prime Minister Tharman Shanmugaratnam on Friday, in his strongest case yet in exhorting the Fed to raise interest rates.

"We've got to that point where the benefits of near zero interest rates for economic growth will be increasingly outweighed by the costs," he said at a discussion panel held during the Latin Asia Business (LAB) Forum held at the Shangri-La Hotel here.

He was exchanging views with Enrique Garcia, president and CEO of CAF - the Development Bank of Latin America, at a discussion moderated by president and CEO of Americas Society and Council of Americas Susan Segal.

Mr Tharman , who is also Singapore's Coordinating Minister for Economic and Social Policies, highlighted that the mood now is different from what it was a year ago, when observers were afraid of the Fed raising interest rates. Instead, there is now anxiety that is caused by uncertainty as to when the Fed would normalise rates.

This uncertainty affects business sentiment as companies hold back on operations. It also results in market volatility, affecting exchange rates of major currencies and capital flows.

“There’s really a desire on the part of many countries to see the Fed get on with it, move gradually, but move ahead so as to reduce uncertainty,” he said.

Mr Tharman had previously raised the issue on the need for the Fed to raise rates sooner than later.

"This year, compared to a year ago, many emerging-market central bank governors and some others were keener that the Fed just get on with it, not because they were keen to see interest rates rise, but because they wanted to reduce uncertainty," he said, as reported by The Wall Street Journal.