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SINGAPORE: United Overseas Bank (UOB) will be cutting the interest rates for its flagship savings account from May 1 to “align with long-term interest rate environment expectations”.

The move comes hot on the heels of a similar move announced by OCBC last week.

Flagship savings accounts offered by banks typically provide tiered interest rates that go up as customers grow their account balance, spend a minimum on select cards and conduct other transactions with the bank such as taking up a housing loan.

In late 2022, the banks made aggressive hikes to the interest rates offered to savers in the midst of a rising rate environment.

However, that changed as expectations built up for central banks to start cutting rates, with UOB making the first move to trim interest rates last May.

With the latest move, the tiered interest rates for UOB One account holders with balances of up to S$150,000, credit their salary to the bank and meet a minimum spend of S$500 a month on an eligible bank card will range from 2.3 per cent to 5.3 per cent.

This translates to a maximum effective interest rate of 3.3 per cent, based on a notice posted on its website on Tuesday (Apr 1).

These rates are down from the current range of 3 per cent to 6 per cent, and a maximum effective interest rate of 4 per cent for the same qualifying conditions.

In a media statement, UOB said while it is revising the One account's interest rates, it has kept the qualifying criteria for bonus interest unchanged.

"We have also retained the eligible balance of S$150,000 to earn the highest effective interest rate," said head of group personal financial services Jacquelyn Tan.

A downward revision in interest rates is also in store for OCBC’s 360 account holders from May 1.

In an email to customers on Mar 24, OCBC noted that “interest rates have been lower this past year” so it is making the changes to be “in line with prevailing market conditions”.

The change means that customers will earn a maximum effective interest rate of 6.3 per cent a year on the first S$100,000 in their account when they credit their salary, save, spend, as well as take up investment and insurance products with the bank.

This is down from the current 7.65 per cent.

For now, other banks have not announced any changes to their flagship savings accounts.

In response to Â鶹’s queries, DBS would only say that the bank “remains steadfast in (its) commitment to helping customers build and manage their wealth effectively”.

Currently, its Multiplier account offers a maximum interest rate of up to 4.1 per cent a year for the first S$100,000 in deposits, if customers credit their salary to the bank and transact in three categories with a total volume of S$30,000 or more a month.

However, one observer said that it might not be long before other banks follow suit, especially as the United States Federal Reserve is set to remain on a rate-cut trajectory.

Phillip Securities’ senior financial services manager Elijah Lee said: “I would expect most banks to be in line with each other as the market for customer deposits is quite competitive, that is why UOB made its own move to cut after OCBC's announcement.

“All it takes is one bank to make a major move and there's a strong chance that others will follow.”

With that, customers thinking of switching savings accounts should think twice.

“The rates could be cut further within a short time and account holders will have to go through the whole exercise of evaluating the best option again,” Mr Lee added.

The US Fed cut interest rates three times last year and is expected to do so again this year, especially as US President Donald Trump’s tariffs policies fuel the risk of a recession in the world’s largest economy.

The uncertainty of further tariffs that could be imposed on more countries have already jolted markets and hammered equities across the board this week.

Mr Lee also said: “Trump’s tariff plans definitely have kept the market on edge and with plans for him to announce more tariffs, depending on the scale and severity of the tariffs, the pace of the rate cuts may be sped up if markets react negatively.”

Goldman Sachs' analysts have raised their 12-month recession probability for the US economy from 20 per cent to 35 per cent. They also see the Fed cutting rates in July, September and November, as opposed to earlier bets on two cuts this year and one in 2026.

Swiss private bank Julius Baer’s chief economist David Kohl said: “Higher tariffs have a tax-like effect on incomes and hence on US (economic) growth. And tighter financial conditions due to market jitters add another headwind to growth.”

Julius Baer has lowered its 2025 growth forecast for the US to 2 per cent, alongside a slight increase in the country’s unemployment rate to 4.4 per cent by the end of the year.

Mr Kohl added that tariffs will likely push up inflation to 3.5 per cent this year, but the Fed is set to “ignore the temporary increase” and cut rates in response to a cooling labour market.