The Federal Reserve is anticipated to implement two interest rate cuts in the fourth quarter of 2025, following signs of mild inflation and a weakening job market. This development is expected to benefit Singapore’s Real Estate Investment Trusts (REITs), which remain resilient due to their stable cash flows and long lease tenures.
Core inflation rates have shown stability, with the Core Consumer Price Index (CPI) excluding food and energy prices holding at 2.8% year-on-year in May 2025. Similarly, the Core Personal Consumption Expenditures (PCE) inflation was mild at 2.5% year-on-year in April 2025. Despite the negative impact of reciprocal tariffs, inflation has remained tame, with prices for apparel and new vehicles falling slightly.
The job market has shown nascent signs of weakness, with the unemployment rate rising modestly to 4.2% in May 2025. Hiring rates have decreased, and layoffs have increased significantly due to uncertainties caused by tariffs. This has led to calls for lower interest rates, with Fed officials suggesting potential rate cuts as early as July.
Singapore’s REITs are seen as a defensive investment, benefiting from the country’s low reciprocal tariff of 10%. Analysts have raised target prices for several S-REITs, including CapLand Int Comm Trust (CICT) and Frasers Centrepoint Trust (FCT), due to anticipated lower interest rates. The sector’s resilience is further supported by its negative correlation with major indices like the S&P 500, indicating potential gains even amidst broader market declines.
As global growth faces headwinds from military conflicts and trade uncertainties, the expected easing of interest rates could provide a boost to S-REITs, making them an attractive option for investors seeking stability and potential returns.
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