The Week Ahead: Interest Rates Set To Rise

The moment has finally arrived. The US Federal Reserve is widely expected to lift interest rates next week, one year after the last rate hike. At the last meeting, policymakers said that the case for an increase in the federal fund rate has continued to strength.

Adding to the case for a rate hike could be the inflation numbers for November. The core rate of inflation has been above 2% for the last 10 months. It is now almost unconscionable that US interest rates can remain below the rate of inflation, given that many signs point to a growing economy.

The Bank of England has an interest-rate decision to make too. It may not be necessary for the central bank to cut rates this time to meet its inflation target of 2%. The fall in the value of sterling has done most of the heavy lifting for it, already.

China will announce its latest retail sales figures. Growth has been comfortably above 10%, though there are signs that it could be coming off the boil. After a succession of growth of more than 10% for four months, the sector only grew at 10% last month.

The Reserve Bank of India’s decision to leave interest rates unchanged last week could be justified if the rate of inflation in India falls again next week. The inflation rate, which climbed to a high of 6% this year, was 4.2% last month.

And finally Singapore will report retail sales for November. With Christmas shopping high on most consumers’ agenda, the pickup in sales growth in October could carry through to next week’s data too. That could be music to the ears of shopping-mall operators that include SPH REIT (SGX: SK6U), which owns Paragon, and Frasers Centrepoint Trust (SGX: J69U), which operates six suburban malls in Singapore.

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