Sora is expected to stabilise at a time when growth in the Singapore economy is also forecast to moderate after a strong year in 2025. — Reuters
SINGAPORE: Interest rates in Singapore could bottom out in the second quarter of 2026 as the US Federal Reserve (Fed) cuts rates, shortening the wait for hedging opportunities.
The Singapore Overnight Rate Average or Sora is the city-state’s key interest rate benchmark and reflects the average rate of unsecured overnight interbank Singdollar borrowing.
For consumers, it influences how much interest they pay on home loans and other bank borrowings.
“If you are looking to hedge interest rates, the timeframe to be looking at it is the first and second quarter of 2026. We are not so far away from the low,” said UOB senior foreign exchange strategist Peter Chia.
Speaking at UOB’s 2026 market outlook webinar on Wednesday, Chia noted that Sora could bottom around 1% before heading towards 1.39% by the end of 2026.
He added that Singapore interest rates were already showing signs of stabilising in late 2025 after the Fed cut rates in the United States in September, October and December.
This is “consistent with our view that a lot of the transmission of Fed rate cuts to Singapore happened before the rate cuts, not after”, he said.
“As Singapore rates have moved lower ahead of the Fed’s rate cuts, we expect the former to bottom ahead of the latter.”
UOB is expecting US interest rates to bottom out in the third quarter of 2026 and Singapore interest rates to bottom out in the second quarter.
Sora is expected to stabilise at a time when growth in the Singapore economy is also forecast to moderate after a strong year in 2025.
The local economy expanded 4.8% in 2025 – topping the government’s forecast of 4%.
In 2026, gross domestic product (GDP) is expected to grow by 2.6%, according to UOB’s latest forecasts. This is up from 2.1% previously.
UOB head of research Suan Teck Kin said: “We had a very strong year in 2025. I doubt we are going to be able to replicate the same momentum that we had last year.”
He noted that 2025 was an unusually strong year, lifted by factors including booming demand for artificial intelligenceI chips and companies shipping goods earlier than usual, especially pharmaceuticals.
Suan added that a 2.6% growth rate is still a “decent number” and “quite close to a potential growth rate of about 3%”.
The government forecasts GDP growth for 2026 to be in the range of 1% to 3%. — The Straits Times/ANN
