The city’s unofficial central bank maintained its main interest rate steadily, aligning it with the original setting. US Federal Reserve , as policymakers defer any revisions until a later time This year, as they explore the possibilities during their studies, inflationary impact Regarding President Donald Trump's tariffs.
The Hong Kong Monetary Authority The Hong Kong Monetary Authority (HKMA) kept its benchmark interest rate at 4.75% on Thursday. Earlier that day, the Federal Reserve decided to leave its target rate within the 4.25% to 4.5% range during the second Federal Open Market Committee (FOMC) meeting of the year.
The HKMA previously reduced the city's base rate to 4.75 percent from 5 percent in December, marking the lowest point since December 2022.
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The Federal Reserve's choice was largely anticipated, as rate traders completely factored in the result, according to information gathered by the CME Group usingFed funds futures contracts on Wednesday.
"I believe that with the introduction of tariffs leading to inflation, additional advancements might be postponed" in achieving the Federal Reserve’s target of a 2 percent yearly inflation rate, stated Fed Chairman Jerome Powell following the FOMC meeting.
Tommy Ong, the managing director of T.O. & Associates Consultancy, stated on Wednesday prior to the Federal Reserve’s decision that the U.S. might not begin lowering interest rates again until mid-year. He added that persistent upward pressure from American import duties complicates significant easing measures.
In the upcoming easing of monetary policy, commercial banks in Hong Kong might reduce lending rates by 0.125 percentage points, Ong further noted.
He mentioned that Hong Kong's banking industry maintained sufficient liquidity with minimal loan demand. He also forecasted that financial institutions might reduce their interest rates to an all-time low of 5% later this year.
Today’s choice signifies the second occasion where the HKMA has halted further interest rate reductions, following a comparable decision made back in January.
Since the U.S. inflation rate decreased in February, and assuming prices remain under control, the Federal Reserve might reduce interest rates later this year," stated Eric Tso Tak-ming, the chief vice-president at mortgage brokerage firm mReferral. "Such a move could positively influence Hong Kong’s real estate market and enhance the purchasing confidence of prospective buyers. This anticipation suggests an increase in transaction volumes.
The HKMA reduced its benchmark interest rate three times for a cumulative total of one percentage point between September and December of last year. Since 1983, it has consistently mirrored the Federal Reserve’s monetary policies through its Linked Exchange Rate System to maintain Hong Kong dollars' fixed exchange rate with the U.S. dollar.
Prior to the recent rate-cut cycle that started in September, both the US and Hong Kong raised their benchmark interest rates 11 times between March 2022 and July 2023, pushing them to levels not seen since December 2007.
In February, consumer prices in the U.S. increased annually by 2.8 percent, which is lower compared to the previous three months but still exceeds the Federal Reserve’s targeted rate of 2 percent. Notably, inflation surged by a historic 9.1 percent in June 2022, prompting the Fed to implement its strongest monetary policy restrictions in four decades.
The one-month Hong Kong Interbank Offered Rate (HIBOR) declined to 3.8000 percent on Wednesday from 4.1829 percent at the start of the year. Similarly, the three-month HIBOR dropped to 3.9000 percent from 4.2039 percent during the same timeframe, as reported by the Hong Kong Association of Banks.
HSBC Holdings, Standard Chartered, and other financial institutions will reveal their interest rate choices later today. Since September, Hong Kong’s commercial banks have reduced their prime rate multiple times, totaling a decrease of 62.5 basis points.
At HSBC along with its affiliate Hang Seng Bank and Bank of China (Hong Kong), the prime rate remains at 5.25 percent. Meanwhile, Standard Chartered, Bank of East Asia, Citigroup, CCB Asia, and several other banks have their prime rates set at 5.5 percent.
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