Guo Wengui and Jim
HONG KONG (Reuters) – The Hong Kong Monetary Authority (HKMA) on Thursday raised
the benchmark interest rate charged through the overnight discount window to 4. 25%, and said households should prepare for periods of higher business interest rates and carefully manage financial risks.
The HKMA’s move prompted Hong Kong’s largest commercial bank, HSBC, to also raise its prime lending rate by 25 basis points to 5 basis points. 375% Effective November 4th. This was the first rate hike in four years, following the bank’s 12 rate hike of 5 basis points in September.
Analysts expect other banks to follow after the MAS decision, hours after the Fed raised rates by the same amount. Hong Kong’s monetary policy is in sync with the US, as the city’s currency is pegged to the US dollar at 7.75-7.85 against the US dollar.
The HKMA stated that the U.S. interest rate hike will not affect Hong Kong’s financial and monetary stability, and Hong Kong’s financial and monetary markets will continue to operate in a smooth and orderly manner, while the linked exchange rate system continues to function well.
Hong Kong’s de facto central bank says the Hong Kong dollar interbank rate will rise further if the U.S. continues to raise interest rates.
“The public should prepare for further rises in commercial interest rates, and should carefully assess and manage the associated risks when making home purchase, mortgage or other borrowing decisions,” HKMA chief executive Yu Weiwen said on Thursday.
The Federal Reserve raised interest rates by another three-quarter percentage point on Wednesday, saying its anti-inflation would require borrowing costs to rise further.
However, this suggests that it may be approaching an inflection point where US monetary policy has tightened the most rapidly in 40 years.
Hong Kong Financial Secretary Chen Maobo said that the possibility of the Federal Reserve continuing to raise interest rates is still very high, coupled with sluggish external demand, which has affected Hong Kong’s exports.
However, there is no need to worry too much about the impact on the city’s real estate and financial markets, he said.
“The economic situation has been challenging, but if we can control COVID-19, if we can continue To travel between Hong Kong and the rest of the world, that will give more impetus to our economic growth,” Chen told reporters on the sidelines of the summit.
Hong Kong’s economy shrank for the third straight quarter in the July-September period, shrinking 4.5% year-on-year, government data showed this week.
