Bank of Singapore expects US Fed to raise rates in December

The impact of Brexit on the US hasn't been extensive and the region's fundamentals look good, according to Bank of Singapore. The Bank of England is signalling a rate cut in July-August, but it is the US Federal Reserve's action on interest rate that will have to be watched in the coming months, Richard Jerram, Chief Economist, Bank of Singapore, told CNBC-TV18. He said the bank expects the US Fed to raise rates in December owing to the uncertainty over Brexit. He also ruled out any chance of quantitative easing, or QE4. Anuj: What is your take on the latest set of macro data that we had - the core sector data? A: The numbers coming out of China are consistent with both the L-shaped recovery that they have been talking about and also the shift in economy towards the service sector and it is clear that that area of the economy is doing much better than manufacturing. So that is quite consistent with the idea that the economy there has stabilised. Sonia: The earlier question was about the core sector data in the Indian market, if you track, because we have seen a big fall to 2.8 percent in the month of May versus about 8.5 in the month of April, any thoughts on that? A: I haven't looked at it. Sonia: The other point is headline on how global central bankers may ease monetary policy further because of the weakness that we have seen post Brexit. Are you getting a sense as well that the European Central Bank (ECB), the Bank of England and perhaps even the Fed may not go ahead with any kind of rate hikes at least in this calendar year? A: I think that is a key theme in response to Brexit. Bank of England is signalling that they are going to cut rates in July or August and the expectation must be that the European Central Bank is going to either expand or extend its quantitative easing maybe the Fed is more interesting; obviously the economy there is still doing quite well but in times of uncertainties they are going to push back rate hikes, nothing until Q3 and maybe until 2017 as well although we are pencilling in December as the next time to be a raising rate in the US. Anuj: There is a minority view of quantitative easing (QE4) if things get bad. Do you think that is a bit outlandish right now? A: I do not know if there is any chance of QE4. The impact on the US economy from Brexit should be quite small. There is already a full employment, the data still looks good and inflation is moving higher, so something is going to have to go disastrously wrong to have QE4 in States and I just do not see what that would be.