How the economy hits your wallet: rates, inflation and cycles

Follow how MAS policy, US rates, inflation, recessions and currency moves reach your loans, savings and job, and decide how to respond to each.

Economic news comes in a steady stream of rate decisions, inflation prints and recession warnings. Most people either ignore it or react to it, and both can cost them: a higher loan instalment one year that they did not see coming, investments sold at a low the next. In this course you link each headline to a line in your own finances, such as your home loan, fixed deposits, grocery bill, job and overseas spending. You learn why MAS uses the Singapore dollar as its policy tool instead of an interest rate, how a Fed decision in Washington reaches your mortgage, and what changes for a household in a recession. At the end you write down rules for which news should change your plans and which you can let pass.

What you'll be able to do

• Explain in plain words why MAS manages the Singapore dollar instead of setting an interest rate
• Trace a change in US rates through SORA to your mortgage, deposits and T-bill yields
• Read a monthly CPI release and compare headline and MAS core inflation with your own spending
• Identify the current stage of the business cycle from a short list of published indicators
• Work out a job-loss buffer from your own job risk and fixed costs
• Estimate what a currency move costs you on a trip, an overseas study plan or a foreign investment
• Write decision rules for when economic news should and should not change your plans

Syllabus

Module 1: Understand how MAS steers the economy through the dollar

How Singapore's central bank manages the exchange rate instead of an interest rate, how the policy band works, and what a tightening or easing does to your prices and pay.

• 1.1 Why MAS manages the Singapore dollar instead of an interest rate
• 1.2 Slope, width and centre: how the policy band works
• 1.3 What a stronger or weaker Singapore dollar does to you
• 1.4 Translate a MAS policy statement into plain words

Module 2: Trace how interest rates reach your loans and savings

Trace a US Federal Reserve decision through global markets and SORA to your mortgage, deposit rates and T-bill yields. Then work out what a rate move would do to your own numbers.

• 2.1 Why Singapore interest rates follow the US Fed
• 2.2 What SORA is and how it ends up in your mortgage
• 2.3 Deposits, fixed deposits and T-bills move with rates, at different speeds
• 2.4 The borrower and the saver in you feel a rate move differently
• 2.5 Stress-test your loans and savings for a rate move

Module 3: Read inflation numbers properly

You will learn what the consumer price index measures, how MAS core inflation differs from the headline figure, why prices rise, and how to track the inflation in your own spending.

• 3.1 What the consumer price index measures and who publishes it
• 3.2 Headline inflation versus MAS core inflation
• 3.3 Why prices rise: demand, costs and imported inflation
• 3.4 Build your personal inflation tracker

Module 4: Know where the cycle is and what changes in a recession

You will learn the stages of the business cycle, the published indicators that show where the economy is, and what changes for a household in a downturn. With that, you can set your rules in advance.

• 4.1 The business cycle: expansion, peak, contraction and recovery
• 4.2 Indicators to watch: GDP, hiring, inflation and the yield curve
• 4.3 What actually changes for households in a recession
• 4.4 Money moves that make sense in a downturn, and ones that do not
• 4.5 Write your recession playbook

Module 5: Protect your income from the job market

How the job market weakens before it shows up in the news, what Singapore's rules and guidelines say about retrenchment, and how much cash to hold in case you lose your income.

• 5.1 How the job market turns before the headlines do
• 5.2 Retrenchment in Singapore: what the rules and guidelines say
• 5.3 Size a buffer for losing your job, not just for emergencies
• 5.4 Skills and contacts are your income insurance
• 5.5 Build your job-loss runway sheet

Module 6: Handle currency moves on trips, studies and investments

How exchange rates move, how those moves change what you pay for holidays, overseas study and foreign investments, and how to cut the fees and timing risk that are in your hands.

• 6.1 Why exchange rates move
• 6.2 Holidays and overseas spending: fees, DCC and timing
• 6.3 Paying for overseas studies or a move in another currency
• 6.4 Currency risk in foreign investments, hedged and unhedged
• 6.5 Plan a foreign currency cost from start to finish

Module 7: Read economic news without reacting to it

How economic headlines are put together, how to tell a real surprise from news that was already expected, and how to write decision rules so the news informs your plans and your own rules decide when you act.

• 7.1 How a headline is built and what it leaves out
• 7.2 Separate what changed from what was expected
• 7.3 Rules that stop you acting on the news
• 7.4 Build your personal economic dashboard

Frequently asked questions

How long does the course take?

About eight hours over seven modules, exercises included. At two or three hours a week, most people finish in three weeks.

Do I need an economics background?

No. You should already be comfortable with interest, inflation and real returns, which are covered in How money works: banks, interest, inflation and risk. Each economic idea in this course is explained from the start and tied to a decision about your own money.

Will this help me time the market?

No. This course is about understanding economic news and setting rules so it does not push you into rushed decisions. Using macro views in a portfolio is covered in Investing Like an Institution.

Is this financial advice?

No. This course is education only. It explains how the economy affects your money and how to make your own decisions, and it never tells you what to buy or when. Rates and figures change, so check the current numbers at the source, and speak to a licensed financial adviser about your own situation.

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