Chart of the Day: Local interest rates jump to six-year high in September

Both short- and long-term rates are on the rise.

Singapore has been enjoying six years of laughably low interest rates, but the era of cheap credit is steadily drawing to a close. The city-state saw a sharp spike in both short- and long-term interest rates in September, with the 3-month Singapore Interbank Offered Rate (SIBOR) hitting its highest level since 2009 this month.

The SIBOR--on which most loans and mortgages are pegged--reached 1.13 in September, according to Deutsche Bank. The SIBOR is expected to continue rising and is forecasted to hit 1.15 by the fourth quarter this year, and 1.20 by the first quarter of 2016.

Since Singapore’s monetary policy stance has a direct impact on rates, the authorities will have to worry how much higher rates can be acceptable under prevailing weak demand conditions, the report said.

"A combination of higher rates and weaker currency could arguably cause some carry flows to Singapore, but unlike regional EM economies, we don’t think Singapore is in need of such flows given its strong liquidity and asset position.We see a compelling case for the MAS to keep its policy stance broadly unchanged in this context," Deutsche Bank noted.