According to Robertsen, the world now has “a little bit too much excess liquidity in the system”, so governments looking to support their domestic economies would pivot to fiscal stimulus, which means more borrowing. “There is a potential tension that we need to be very alert to,” says Robertsen. “For the moment, bond yields are relatively neutral in terms of financing costs. An increase in debt issuance is not necessarily going to cause all kinds of problems in terms of governments’ interest expense ratios.”
That said, if the world sees a “consistent and persistent increase” in debt issuance from sovereigns and corporates, upward pressure on long-term interest rates and a steepening yield curve are likely.
To this end, Robertsen believes the transition to fiscal stimulus need not be “disruptive”. However, if sovereigns and corporates rush to tap the debt markets over the next six months, the world may see a “traffic jam” in global debt issuance.
In the US, last year was nearly a record for investment-grade bond issuance. Among issuers, technology companies accounted for a growing proportion of that. “The notable point is that when technology companies issue debt, they’re not issuing two-year debt. They’re issuing 10-, 15- and 30-year debt, so there’s competition for investor capital.”
See also: OCBC SME Index inches up to 50.8 in 4Q2025, up from 50.5 last quarter
Risk of inflation ‘underappreciated’
With global investors sitting on “fairly large piles of cash” — over US$7 trillion ($9 trillion) in US money market funds alone — Robertsen warns that there is an “underappreciated” risk of inflation.
While excess liquidity doesn’t necessarily translate to higher inflation, an unexpected inflationary surge could happen if financial assets are seen as “fully valued” and could well be injected into the real economy, he says.
See also: Vietnam leader calls for ‘new model’ to hit 10% growth goal
Even though core and headline inflation figures have appeared to decline in major economies, the cost of living has not. “The cost of living in every major city in the world, both developed and emerging, is now double-digit percentages above where we were pre-Covid.” More importantly, the world has not normalised the cost of living, which is becoming a political challenge as well as an economic challenge, he says.
This year, inflation rates may increase due to higher commodity prices as well. Barely into 2026, gold and silver are reaching new records, while industrial metals, including copper, have gained as well. Oil, interestingly, dipped lower after Venezuela fell under US control. “All it would take is oil to start turning more meaningfully higher and we have a potential combination that is very uncomfortable for central banks around the world,” says Robertsen.
Now that inflation risks remain, Robertsen believes the US Federal Reserve does not need to cut rates, although it is being pressured to do so for various reasons. Post-Covid, central banks underestimated the threat of inflation then. Two years later, it “feels like everybody has forgotten about inflation”.
Political pressures are also unlikely to derail the Fed’s policy. Robertsen dismisses the risk that US President Donald Trump could engineer an early exit for Fed chair Jerome Powell, whose term ends in May. Even if a new Fed chair were more accommodating towards Trump, the Fed will likely conduct monetary policy in line with what is required for the economy, he says.
Monetary easing ‘largely behind’
Here in Asia, the era of monetary easing is “largely behind”. Robertsen calls 2025 an “unprecedented perfect storm” for central banks to cut rates: low inflation, currencies strengthening against the US dollar and declining oil prices. “You rarely get that kind of a combination of both external and domestic factors,” he says.
This year, Asia’s growth might slow, trailing even the US, which is expected to pick up speed. A key reason is a moderation in China’s growth to 4.6% this year, says Edward Lee, Standard Chartered’s chief economist & head of foreign exchange, Asean and South Asia. On Jan 19, China reported its 2025 GDP growth rate of 5%.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
China’s real estate sector, still stuck in the slump, has dropped “quite precipitously” over the last few years. Local governments’ land revenue, one of the key indicators, has fallen further on a y-o-y basis, says Lee. Also, infrastructure investment has slowed, though he attributes this to the Chinese government’s fiscal spending allocated to debt swaps. However, the so-called new-economy industries — advanced manufacturing, the green economy, and digitalisation — have overtaken real estate, accounting for 17% to 18% of the economy.
China also enjoyed a lift last year from stronger-than-expected external demand, with implications for the rest of the region. To Lee, the rest of the world cannot rely on China if China is already relying on external demand. In contrast, China’s investments would benefit the broader world, he says.
‘Understated’ Asean
In Asean, growth is also expected to moderate slightly to 4.7% this year, from 4.8% previously, as front-loading exports to the US in early 2025 ease off. Lee warns that non-electronics, non-commodities segments may face more downside within the Asean-6.
Meanwhile, trade uncertainty remains a significant concern for Asean exporters. For countries supposedly with a deal with the US, such as Malaysia, key details of trade deals were left “intentionally blank”. For others without, such as Vietnam, this uncertainty is their top worry. “I think it’s actually valid,” says Lee, citing his recent visit to the country.
If Asean, whose geopolitical stability and “understated” trait can play its cards right, can add value to both the US and China while creating more opportunities for itself. “If you consider how much global FDIs (foreign direct investments) have been coming to Asean [during] Covid, it’s a clear indication of how global companies look at the situation,” says Lee.
China still produces 15% of global intermediate manufactures and Northeast Asia, outside China, is around 10%. Asean, in contrast, is still hovering around 6% “after all these years. “It only makes sense that we get more investments on that front. In this new world … it’s good for Asean to go out to like-minded partners who still want to trade,” says Lee.
From ‘de-dollarisation’ to ‘re-dollarisation’
Against this shifting macro backdrop, Standard Chartered is making an out-of-consensus call that the US dollar will strengthen this year, driven by a robust US economy, and that the Fed will not need to cut rates. “But I also think that the hysteria around de-dollarisation, the selling of dollar assets, the diversification away from the US and the US economy has been overstated,” says Robertsen, who believes that the US dollar might gain between 5% and 8% this year and catch markets off guard.
With stronger US growth and higher productivity, and the buzz over AI, any Fed rate cut currently priced in by markets is likely to be reversed. This trend is “a little bit too excessive” and should also be bullish for the dollar, says Divya Devesh, co-head of FX research for Asean and South Asia.
Despite the “sell America” narrative that gained traction last year, investors remain keen on the world’s largest economy and market. “If you look at the numbers last year, net foreign purchase of US assets by foreigners was actually the highest on record, just in the first 10 months of the year,” says Devesh.
Also, there has been a bias among retail investors in Asia to invest more in US equities, sometimes at the expense of domestic equities, or rotating away from domestic equity exposure, says Devesh, who suggests that rather than de-dollarisation, markets are witnessing a form of “re-dollarisation”.
Exceptionally cheap yen
In foreign exchange markets, the renminbi (RMB) and the Japanese yen (JPY) remain key anchors for the region and function as reference points for other regional economies. As long as the RMB and JPY look “very undervalued”, other central banks will also feel a bit more comfortable when their currencies are undervalued. The intervention risk may not be as high as well. For the RMB, Standard Chartered’s view is that it will be around 7 versus the US dollar in the first half of the year, before appreciating to 6.85 by the end of 2026.
Separately, the JPY is “exceptionally cheap”, says Devesh, who expects USD/JPY to end the year around 148. However, Japan could emerge as one of the more interesting potential surprises in 2026, with Prime Minister Sanae Takaichi, who on Jan 19 called for a snap election, pushing ahead with domestic investment, which will help generate more momentum. “In my opinion, the fascinating story for Japan is the significant increase in Japanese bond yields historically,” says Robertsen, adding that excessive savings — and thus capital in Japan — could be a “key driver of emerging markets this year”.
At home, Singapore may be the first Asean economy to tighten policy to unwind some of the pre-emptive moves it made last year. The Monetary Authority of Singapore (MAS) eased its monetary policy twice in January and April.
Lee, who expects Singapore’s growth to taper to around the 3% mark in 2026 and core and headline inflation to come in at the upper end of MAS’s range of 1.5%, believes the MAS may remove 50 basis points in April. Against the US dollar, USD/SGD (Singapore dollar) could edge higher towards 1.30, though not significantly
