Hong Kong Monetary Authority Keeps Base Rate Unchanged
Following US Federal Reserve’s Lead
The Hong Kong Monetary Authority (HKMA) left its base rate unchanged at 4.75 per cent on Thursday, mirroring a move by the US Federal Reserve to keep rates steady.
Tight Link to the US Dollar
Hong Kong’s monetary policy is closely tied to the US dollar, with the city’s currency pegged to the greenback in a tight range of 7.75 to 7.85 per US dollar. This means that the HKMA’s monetary policy decisions are often influenced by those of the US Federal Reserve.
Uncertain Future Rate Cuts
"The policy decision is in line with market expectations. However, the pace of future rate cuts remains uncertain," HKMA said on Thursday. "Interest rates in Hong Kong might still remain at relatively high levels for some time, and the extent and pace of future US interest rate cuts are subject to considerable uncertainty," it added.
US Federal Reserve Holds Steady
The US central bank held interest rates steady on Wednesday, with Federal Reserve chair Jerome Powell stating that there would be no rush to cut them again until inflation and jobs data made it appropriate. This move put Fed policy in a holding pattern at a time when the US economic landscape seems both stable and wildly uncertain, awaiting further clarity on the impact of President Donald Trump’s policies.
Hong Kong’s Financial Markets
"In Hong Kong, our financial and monetary markets have continued to operate in a smooth and orderly manner," HKMA said, adding that market liquidity has remained stable and the Hong Kong dollar exchange rate has stayed steady. The public should manage the interest rate risk when purchasing property, taking out mortgages or making other borrowing decisions, HKMA said.
Conclusion
The HKMA’s decision to keep rates unchanged is in line with market expectations, but the future pace of rate cuts remains uncertain. The city’s financial and monetary markets have continued to operate smoothly, with the Hong Kong dollar exchange rate remaining stable. As a result, the public should be cautious when making borrowing decisions, taking into account the interest rate risk.
Frequently Asked Questions
Q: What is the current base rate set by the Hong Kong Monetary Authority?
A: The current base rate is 4.75 per cent.
Q: Why did the HKMA leave its base rate unchanged?
A: The HKMA’s decision was in line with market expectations, and the pace of future rate cuts remains uncertain.
Q: How does the HKMA’s monetary policy affect the Hong Kong economy?
A: The HKMA’s monetary policy is closely tied to the US dollar, and the city’s currency is pegged to the greenback in a tight range. This means that the HKMA’s monetary policy decisions are often influenced by those of the US Federal Reserve.
Q: What should the public do to manage interest rate risk?
A: The public should manage the interest rate risk when purchasing property, taking out mortgages or making other borrowing decisions, the HKMA advises.
