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Update: STI gains as economists see dovish stance from Fed

SINGAPORE share prices gained on Thursday morning amid a more dovish stance taken by the US Federal Reserve on interest-rate hike.

Some economists now expect the Fed to raise rates in September, after the US central bank broadly lowered its outlook on the US economy this year.

Bank of Singapore said on Thursday a rate hike by the Fed in September now looks more probable, with the US central bank pushing back expectations for the path of rate increases over the coming couple of years.

"The Fed does not explicitly refer to the exchange rate, but it looks like USD (US dollar) strength is responsible for the shift, as it slows growth and inflation," said Richard Jerram, chief economist at the private bank, in the report.

"We remain structurally positive on USD, but the pace of appreciation should be more moderate than over the past year."

Dr Jerram also flagged that the Fed seems comfortable taking the risk of a significant inflation overshoot in order to avoid the risk of deflation.

Barclays, likewise, called for the first rate hike to come in September.

The Straits Times Index (STI) was up 14.49 points to 3,376.24 as at 10.08am.