Market observers noted that the Federal Reserve's decision to pause interest rate cuts has provided Asian markets with a "breather" and more certainty.

In Singapore, banks and real estate investment trusts (REITs) are expected to be the "biggest winners" of stable interest rates, although sectors like shipping and industrial are unlikely to see growth without significant stimulus measures.

Industry analysts stated that the pause in U.S. interest rates is unlikely to impact Singapore's corporate and sovereign bonds.

On Wednesday, March 19, the Federal Reserve once again paused rate cuts, with policymakers voting to maintain the key lending rate between 4.25% and 4.5%.

The Fed highlighted that economic uncertainty has increased due to Donald Trump's stop-and-go tariff measures, which have unsettled the economy.

It also revised down U.S. economic growth forecasts for 2025 while raising inflation expectations, still projecting two rate cuts this year—consistent with December's forecast.

Wall Street stocks rose, while the yield on 10-year U.S. Treasury bonds fell sharply.

In Asia, market sentiment appeared positive following the Fed's announcement.

In Singapore, the benchmark Straits Times Index (STI) rose 0.6% to 3,931.3 points around 10 a.m. on Thursday. The three local banks—DBS, UOB, and OCBC—gained on the index, with most local REITs also posting gains.

Regionally, Malaysia's FTSE Bursa Malaysia KLCI rose 0.1%, South Korea's Kospi gained 0.4%, and Australia's ASX 200 climbed 1%.

Ray Sharma-Ong, Head of Multi-Asset Investment Solutions for Southeast Asia at Aberdeen Standard Investments, noted that the Fed has indicated that U.S. economic growth remains steady, with inflationary effects likely temporary. The Fed also acknowledged that trade tensions have increased economic uncertainty.

Sharma-Ong suggested that the Fed may prefer significant rate cuts during economic downturns rather than raising rates to combat inflation.

"We expect two rate cuts this year, with a bias toward more cuts rather than fewer," he added.

Market Impact

Kerry Craig, Global Market Strategist at J.P. Morgan Asset Management, stated that positive policy developments outside the U.S. are benefiting international equity markets.

Meanwhile, in fixed-income markets, weaker growth prospects mean U.S. Treasuries may continue to show an asymmetric downside rather than upside, he said.

Simon Ree, Founder of the Online Trading Academy's Tao of Trading, noted that the pause in rate cuts is "not a bad outcome" for Asian markets.

"Markets hate uncertainty the most, and this pause gives us a breather without sudden shocks disrupting the system," Ree said.

Observers noted that Singapore's banks and REITs are the biggest beneficiaries of stable interest rates.

Ree explained that for local banks, the pause means their net interest margins won't shrink too quickly. He believes these banks could remain strong or even see profits if loan demand rebounds as rate uncertainty diminishes.

He added that REITs will also "get a breather," as their yields remain attractive compared to bonds without the prospect of rising debt costs.

For other sectors, Ree noted that while the pause keeps borrowing costs stable, it also means they won't receive significant stimulus.

He added that export-intensive industries or shipping companies may see flat growth due to a lack of global demand and potential trade tensions.

Asian Bond Markets Remain Stable

Colin Low, Portfolio Manager at Bondsupermart's Global Fixed Income Team, stated that yields on shorter-term Asian bonds may rise, while longer-term bonds will see reduced price volatility in Asian markets.

Low added that Singapore's corporate and sovereign bonds won't be significantly affected by the pause, as the country's benchmark rates are unlikely to change drastically.

Similarly, Ree expects Asian bond prices to remain stable or rise slightly due to steady capital flows rather than a rush back to the U.S.

For Singapore, stable U.S. interest rates mean less pressure on the Singapore dollar, with the market remaining steady. Ree anticipates stable demand for government bonds and high-grade corporate bonds.