This trend of ever-lower rates is a significant change from just a couple of years ago, when the banks were competing with one another to offer rates of nearly 3% for these accounts. According to a report by UBS, the Fed’s latest economic projections indicate that its current rates will be put on hold until the end of 2023 at least. “The major central banks are pointing to even more accommodative policy for even longer. Investors are being pushed harder to find yield. We expect real returns on cash and high grade bonds to be negative for the foreseeable future,” it says. Singapore’s monetary policy hinges more on the management of the relative strength of the Singdollar versus a basket of major currencies, and not by setting rates unlike the US, and whose movement of the rates affect rates here as well. OCBC is by no means alone. Since Jan 1, DBS Bank and Standard Chartered had already cut their rates to their flagship DBS Multiplier deposit account and JumpStart, respectively. Rates will be slashed by up to 0.8 percentage points depending on the total eligible transactions per month for DBS’s Multiplier account. This is the third round of changes to the bank’s Multiplier account since May 2020.
SEE: An uphill test
To be sure, low interest rates of savings accounts won’t annoy everyone. For example, property investors can take out cheaper loans, providing further support to the property market. And in the search for better returns, many people will be motivated to invest more of their savings, adding to further liquidity in the financial markets. Others, perhaps more conservative, might still keep a significant portion of their savings in these accounts despite the lower rates. It all depends on the savvy and appetite of the individuals.