The Jackson Hole Symposium has highlighted a potential shift in US monetary policy, with Federal Reserve Chair Jerome Powell indicating that interest rate cuts could be on the horizon. This comes as the US job market has shown significant signs of weakening over the past three months, with job creation falling short of expectations. Powell noted that whilst the unemployment rate remains low at 4.2%, underlying issues such as tighter immigration policies and a slowing labour force growth could lead to increased layoffs and rising unemployment.
Powell’s remarks suggest that the Federal Reserve may consider adjusting its policy stance at the upcoming Federal Open Market Committee meeting on 16-17 September. The current policy rate is considered restrictive, and a transition towards monetary easing could support the labour market. This potential policy shift is seen as a response to the marked slowdown in job creation and a temporary rise in inflation due to factors like new tariffs and supply chain adjustments.
The implications of this potential policy change are significant for Singapore’s Real Estate Investment Trusts (S-REITs). UOB Kay Hian Research maintains an “OVERWEIGHT” recommendation on S-REITs, anticipating a recovery in liquidity triggered by the expected rate cuts. The report recommends buying blue-chip S-REITs such as CapitaLand Ascendas REIT, Keppel DC REIT, and Lendlease REIT, which are poised to benefit from the anticipated easing of monetary policy.
As the Federal Reserve considers rate cuts, business sentiment is buoyed by easing trade tensions, with the US reaching trade agreements with the EU and Japan. These developments, coupled with Singapore’s stable fiscal environment, position S-REITs as attractive investment options amidst the evolving economic landscape.
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