The Fed Hiked for the First Time in Three Years. Singapore's Floating Rate Moved Four Basis Points.

The Federal Open Market Committee raised its target range to 3.75-4% on 16 September, its first increase in three years, and it did so unanimously. Six weeks earlier the same committee had held rates with three members dissenting in favour of a hike. A borrower watching from Singapore would reasonably have expected the local cost of money to follow.

It did not, or at least not yet. Three-month compounded SORA was quoted at 1.19% on 4 September and 1.2302% on 25 September. That is four basis points across the hike. One-month compounded SORA went the other way, from 1.30% to 1.2505%.

What the Fed actually did

The FOMC statement of 16 September put the target range at 3¾ to 4 percent, on a 12-0 vote, framing the move as support for "a timelier return to the Committee's 2 percent goal." The unanimity is the part worth noting. At the 29 July meeting the Committee held at 3.50-3.75% and three members dissented — all three wanting a hike. By September the dissenters had become the whole committee.

That progression is exactly why the move did so little locally. A rate rise that three governors were publicly arguing for in July is not news to a swap desk in September. It was in the price long before it was in the statement, which is the same mechanism that pushed two Singapore banks to raise fixed rates in August, a month before the Fed moved at all.

Why SORA does not track the Fed target

Singapore does not set an interest rate. MAS conducts monetary policy through the exchange rate, managing the trade-weighted Singapore dollar within a band. The consequence is that domestic interest rates are largely determined abroad: SGD rates sit roughly at foreign rates less the market's expected appreciation of the Singapore dollar.

So US policy does transmit here. But it transmits through expectations of the whole path of rates and of the currency, not through the announcement itself. When the expected path is unchanged and only the calendar has moved, the announcement lands on a market that already repriced.

The lag is built into the instrument

There is a second reason the September print looks quiet, and it is mechanical rather than economic.

Compounded SORA is backward-looking. The three-month compounded rate published on 25 September is the compounded average of daily SORA over the preceding three months. Only nine business days of that window sat after the hike. Even if the full 25 basis points were passing through to overnight SGD rates from 17 September onward, roughly seven-eighths of the averaging window would still be pre-hike, and the published figure would barely move.

The tenor structure makes the direction visible. On 27 July the three compounded tenors were quoted at 1.22% (1M), 1.16% (3M) and 1.09% (6M). A backward-looking average is lower the longer its window when rates have been rising — the six-month figure is still carrying the cheaper money of early 2026. That inversion was already telling you SGD rates were climbing, two months before the FOMC confirmed it.

The practical reading: your floating instalment does not reprice on the day the Fed moves. It reprices when your bank next resets against a three-month average that is still filling up with post-hike days. On a quarterly reset schedule, a hike in mid-September shows up properly in the first quarter of 2027.

What each scenario costs

An S$800,000 loan over 25 years, on the cheapest widely-quoted floating package at three-month SORA plus 0.25%.

The move that has actually happened costs S$15 a month, or S$180 over a year. The move that has not yet happened — a clean pass-through of the whole hike into the compounded average — costs S$94 a month, S$1,133 a year. Both are small next to the S$452 a month that separates the cheapest bank package from the HDB concessionary rate, which is pegged to the CPF Ordinary Account rate and has not moved at all.

Against the 1.40% two-year fixed rates quoted by HSBC and Citi, today's floating package is 8 basis points more expensive, at S$30 a month. That is the price of certainty right now, and it is unusually low. A borrower who believes another hike is coming is being asked very little to remove the question.

What to do with this

Three things follow from the arithmetic rather than the headline.

If your loan is on a three-month SORA peg, the September hike is still arriving. Do not read a quiet October reset as the end of the story; read the next two resets. The averaging window has to turn over before the rate you pay reflects the rate the market is charging.

If you are choosing between fixed and floating this quarter, the spread is the whole decision and the spread is thin. Eight basis points is not a forecast, it is a coin-flip priced at almost nothing, and the asymmetry favours the borrower who dislikes surprises.

If you are on the HDB concessionary loan and have been tempted by bank rates, the gap in your favour has narrowed by exactly four basis points this month. The case for switching, or against it, is unchanged. What has changed is that the direction of travel is now up rather than down, and refinancing decisions made on the assumption of further cuts need rechecking.

Method

Fed target range and vote from the FOMC statement of 16 September 2026. Compounded SORA figures as published on the dates shown: 27 July from MoneySmart, 4 September from PropertyNet, 25 September from Cashew and cross-checked against Nexus Mortgage, which quote 1.2505% and 1.2302% for the one- and three-month tenors respectively. Compounded SORA is a backward-looking average; a single day's print is not a forward rate. Bank spreads are the indicative packages published for a S$1 million loan and will differ by profile and loan size. Instalments are computed on a standard amortising formula, S$800,000 over 25 years, and are the difference in monthly payment only — not an affordability assessment. The HDB concessionary rate is 2.6%, pegged at the CPF Ordinary Account rate plus 0.1%.