UOB to cut maximum interest rate for flagship savings account from May 1

At its last policy meeting, the US central bank left its benchmark overnight interest rate unchanged while holding onto its outlook for three cuts in borrowing costs this year.

Fed chair Jerome Powell has said the timing of the rate cuts still depends on officials becoming more confident that inflation will continue to decline towards the central bank’s target of 2 per cent, even as the economy continues to outperform expectations.

Despite the caution by Fed officials, “markets are still expecting the US central bank to cut rates in June with a 60 per cent probability”, said OCBC’s managing director of investment strategy Vasu Menon.

Market watchers will be keeping a close eye on inflation and household spending data in the coming months.

“There are hopes that consumer spending could weaken in time especially since real disposable income growth declined in February … At the same time, core services inflation is slowing and could continue throughout the year,” Mr Menon wrote in a note on Monday.

“By the time the Fed meets in June, markets are hopeful that economic and inflation data could be convincing enough for them to commence rate cuts,” he added.