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Higher-for-longer rates a boon for savers

There is no shortage of higher-yielding options if investors are prepared to recalibrate their risk and liquidity requirements

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Genevieve Cua

Genevieve Cua

Published Mon, Dec 23, 2024 · 06:00 AM
    • Lower-risk alternatives such as fixed deposits may remain attractive as expectations for rate cuts by the US Federal Reserve in 2025 are now dampened.
    • Lower-risk alternatives such as fixed deposits may remain attractive as expectations for rate cuts by the US Federal Reserve in 2025 are now dampened. PHOTO: PIXABAY

    RISK-AVERSE investors may well be able to keep having their cake and eating it.

    The US Federal Reserve’s guidance for interest rates in its latest meeting last week dampened expectations for rate cuts in 2025. Fed chairman Jerome Powell indicated two cuts in 2025 or a total of 50 basis points, compared to earlier expectations of 100 basis points.

    Markets, however, may be pricing in only one rate cut in 2025, or even none. Morningstar said the market is incorporating a 60 per cent probability of the fed funds target range being at 4.25 to 4.5 per cent or higher by end-2025, “meaning no net rate cuts in 2025”.

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