Growing fears that US inflation will resume upward trend

Expect interest rates to remain high and the Singapore dollar and other Asian currencies to ease as US President-elect Donald Trump starts to bring his inflationary economic agenda into reality.

- Ovais Subhani

However, the true extent of the impact these policies will have can be assessed only when he turns his campaign trail promises into law after he takes office on Jan 20, analysts said.

His pledges to cut taxes, unwind regulations on energy and finance, and impose harsh tariffs on trade partners have increased concerns that the US government will be looking to raise more debt to finance these moves.

While hopes that lower taxes and deregulation will result in stronger growth boosted the S&P 500 index on Wall Street to a record overnight, the US bond market virtually tanked.

The yield on 10-year US Treasury bonds rose to 4.4 per cent on Nov 6, up from the year's low of 3.6 per cent in September.

Analysts said the bond market is pricing in a scenario where higher debt and deficits, in combination with a pickup in growth, may reignite inflation.

Mr Eric Robertsen, global head of research and chief strategist at Standard Chartered Bank, said: "Trump is expected to pursue loose fiscal policy; this, combined with his pledge to raise tariffs, has raised fears that US inflation may resume its upward trend."

He said resurgent US growth and inflation would likely push the Federal Reserve to keep its benchmark rates higher than earlier expected through 2025. The Fed may give some clues about its views on Nov 7, when it announces its latest rate decision.