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Rate hike by Fed in September now more likely: Bank of Singapore

BANK of Singapore said on Thursday an interest-rate hike by the Federal Reserve 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.

Fed's more dovish stance also indicates that economic data will need to improve rapidly in order for the central bank to move, Bank of Singapore said in a report.

"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.

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