SORA Vs US Fed Rate: 5-Year History Chart To Show Correlation

When the Federal Reserve announces US Fed rate cuts, it is common to hear the assumption that Singapore’s SORA will fall soon after. Many homeowners and market watchers instinctively ask: does SORA follow the US Fed? The logic feels intuitive. 

The US dollar dominates global finance, capital flows move across borders quickly, and Singapore is often described as an “interest-rate taker” in a system shaped by US monetary policy. Media headlines reinforce this belief by framing US Fed rate cuts as a global trigger for lower borrowing costs everywhere. There is truth in this assumption… but only up to a point.

Over the past five years, SORA vs US Fed movements have often pointed in the same broad direction. However, the relationship between SORA and Fed rates has not been one-to-one. Timing has differed, magnitude has differed, and in some phases the gap has widened – rather than narrowed. Understanding how SORA tracks the US Fed requires looking beyond headlines and into data.

This article examines what actually happened over the past five years, using observed data rather than forecasts, to understand the SORA correlation with US interest rates and why it behaves differently across cycles.

The Data Framework: What We’re Comparing and Why

Before interpreting the relationship between SORA and Fed rates, it is important to be clear about what is being compared.

This analysis looks at the past five years, spanning the pandemic-era lows, the sharp global tightening cycle, the plateau phase, and the most recent easing period. Two benchmarks are examined side by side:

• The US Federal Funds Rate, a policy rate set by the US Federal Reserve
• Singapore’s 3-month compounded SORA, a market-derived benchmark reflecting actual overnight interbank SGD transactions

The distinction matters. The US Federal Funds Rate moves in discrete steps through policy decisions. The SORA interest rate Singapore borrowers track is calculated from real transactions and reflects prevailing liquidity and funding conditions in local money markets.

Comparing these two rates allows us to observe SORA vs Fed rate movements over time, identifying correlation, lag, and divergence without assuming a mechanical link.

Fig. 1: US Fed Funds Rate vs Singapore 3-Month Compounded SORA Chart (5-Year View)

Observing the Relationship US Fed Funds Vs SORA: What the 5-Year Chart Shows at a High Level

At a high level, the chart shows that SORA vs US Fed movements generally align directionally over a full interest-rate cycle. When global rates were cut aggressively, both fell. When global rates were raised sharply, both climbed, reinforcing the idea that Singapore interest rates and global rate cycles are linked.

However, the way they move differs visibly. The US Federal Funds Rate adjusts in steps following policy meetings, while SORA moves continuously, sometimes fluctuating day to day. This makes SORA more volatile even when the overall trend is clear.

Another key observation is asymmetry. SORA correlation with US interest rates appears tighter during rate hikes than during rate cuts. While both rates rose closely together during tightening phases, easing phases show greater variation in timing and magnitude.

The chart supports a balanced conclusion: correlation exists, but how SORA tracks the US Fed depends heavily on where the economy sits in the interest-rate cycle.

Periods of Strong Correlation: When SORA Tracked the Fed Closely

The strongest SORA correlation with US interest rates appears during the global tightening cycle from mid-2022 through 2023.

During this period, the Fed raised rates aggressively in response to persistent inflation. The US Federal Funds Rate climbed rapidly in successive steps, and SORA rose sharply alongside it, remaining elevated for an extended period. Directional alignment in SORA vs Fed rate movements is clear on the chart.

This strong correlation was driven by global conditions. USD liquidity tightened, funding costs increased, and banks repriced risk rapidly. In such environments, differences between policy and market rates compress.

For Singapore, higher global funding costs fed into domestic markets, pushing the SORA interest rate higher even though Singapore does not target interest rates directly. During tightening cycles, global forces dominate, strengthening the relationship between SORA and Fed rates.

Plateau Phase: When Both Rates Stayed High but Behaved Differently

After the hiking cycle, both rates entered a prolonged plateau from 2023 through much of 2024. The US Federal Funds Rate remained near its peak, and SORA stayed elevated.

However, the chart shows that SORA was not static. While Fed policy paused, SORA fluctuated within a range, responding to liquidity conditions, episodic stress, and interbank funding demand.

This phase highlights why SORA moves differently from Fed rates. Even when policy rates are unchanged, market-based rates respond to live funding dynamics. This reinforces that SORA is not a delayed copy of Fed policy but a real-time reflection of local money-market conditions within broader Singapore interest rates and global rate cycles.

Divergence and Lag: Why SORA Fell Faster Than the Fed

The most striking divergence appears from 2025 onward.

As the Fed began gradual US Fed rate cuts, SORA declined earlier and more sharply. A clear gap opened between the two lines, showing that whether SORA follows the US Fed is the wrong question during easing cycles.

This divergence reflects local conditions rather than a breakdown in correlation. Capital inflows increased, the Singapore dollar strengthened, and domestic liquidity became abundant. These factors eased funding conditions, allowing SORA to fall faster than the US Federal Funds Rate.

This phase demonstrates why SORA moves differently from Fed rates during easing cycles: local liquidity dominates, weakening the apparent SORA correlation with US interest rates.

Why Timing Differs: Understanding the Transmission Mechanism

The relationship between SORA and Fed rates is indirect by design.

The Federal Reserve sets a policy rate influencing global financial conditions. Singapore’s policy, however, is managed by the Monetary Authority of Singapore, which operates through the exchange rate rather than domestic interest-rate targeting. As a result, Singapore monetary policy shapes interest rates through liquidity, capital flows, and banking dynamics.

Fed decisions influence Singapore indirectly. SORA responds when funding costs change and liquidity shifts. This explains how SORA tracks the US Fed over time and why divergence is expected rather than unusual.

What This Means and What It Does Not Mean?

The data clarifies several misconceptions.

US Fed rate cuts do not guarantee immediate SORA drops. They do not ensure equal magnitude moves or predictable timing. Headlines often oversimplify SORA vs US Fed dynamics.

A more accurate framing is this: Fed policy provides directional signals, while SORA reflects local outcomes shaped by Singapore monetary policy and liquidity. Understanding this distinction helps readers interpret Singapore interest rates more realistically.

Correlation is context, not a promise.

Final Thoughts

Over the past five years, SORA vs US Fed movements have been correlated but never perfectly aligned. Tracking has been strongest during tightening cycles, while divergence has appeared during easing phases.

The Fed sets the global backdrop. SORA reflects Singapore’s local reality.Understanding how SORA tracks the US Fed, and why it sometimes does not, leads to better expectations and clearer interpretation of SORA vs Fed rate movements without false certainty.

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*The information and publications on this website are not intended to be and do not constitute financial advice from Dollarback Mortgage Pte Ltd.