Why are CPF Special and Medisave account interest rates increasing?

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CPF Special and Medisave Account Interest Rates to Increase Due to Higher Yields on Government Securities

Interest rates for CPF Special and Medisave accounts will rise to 4.01 per cent per annum in the third quarter of this year, an increase from the previous 4 per cent. This adjustment is directly linked to the rising average yield of 10-year Singapore Government Securities, which serves as the benchmark for these CPF accounts. The upward trend in these yields is primarily influenced by the aggressive monetary policy tightening undertaken by the US Federal Reserve.
Link to Singapore Government Securities Yields

The interest rates for both CPF Special and Medisave accounts are calculated by adding 1 per cent to the 12-month average yield of 10-year Singapore Government Securities. This formula is subject to a minimum floor interest rate of 4 per cent per annum. As the calculated rate has surpassed this floor, the interest rates for these accounts are consequently increasing. For instance, the current increase reflects this mechanism, moving from 4% to 4.01%.
Influence of US Federal Reserve Policy

The elevated interest rates observed in 10-year Singapore Government Securities bonds are largely a consequence of the US Federal Reserve's sustained efforts to combat inflation. Over the past 14 months, the Federal Reserve has implemented ten consecutive rate hikes, pushing its benchmark interest rate to approximately 5.1 per cent. This policy aims to curb spending and cool down the US economy.
Quarterly Review of Account Interest Rates

Interest rates for the Ordinary, Special, and Medisave accounts are reviewed on a quarterly basis. This regular assessment ensures that the rates remain aligned with prevailing market conditions and the underlying benchmarks. In contrast, the interest rate for the Retirement Account is reviewed annually. The government plays a role in maintaining these rates by investing CPF savings in Special Singapore Government Securities, which are non-tradable bonds issued specifically to the CPF Board.

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Why are CPF Special and Medisave account interest rates increasing?

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