HONG KONG — The Hong Kong Monetary Authority (HKMA) on Thursday cut its base rate charged via the overnight discount window by 50 basis points to 5.25 percent, tracking a move by the US Federal Reserve.
Hong Kong’s monetary policy moves in lockstep with the United States as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.
HKMA said the US interest rate cut will have a positive impact on the economy of the Asia financial center and will provide some room for easing of local interest rates.
“In Hong Kong, our financial and monetary markets have continued to operate in a smooth and orderly manner. Market liquidity condition has remained stable with the Hong Kong dollar exchange rate hovering within the convertibility zone,” HKMA acting Chief Executive Howard Lee told reporters.
“The rate cut cycle has just begun, interest rates will remain at relatively high levels in the foreseeable future. The public should carefully assess and continue to manage the interest rate risk when making property purchase, mortgage or other lending decisions,” Lee added.
Hong Kong major banks followed with HSBC cutting its best lending rate in the city by 25 basis points to 5.625 percent effective September 20, and Bank of China (Hong Kong) said it would cut its Hong Kong prime rate to 5.625 percent from 5.875 percent effective September 23.
“Even though uncertainty about future US interest rates still exists, the direction is becoming clearer. Hong Kong interest rates are expected to ease accordingly and that will help support Hong Kong economic growth,” Hang Seng Bank’s chief economist Thomas Shik said.
On Wednesday, the US central bank kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction and policymakers see another 50 basis points of cuts in 2024.
“Lower rates are intuitively positive for real estate but will have an uneven impact across Asia property markets and stocks,” Morgan Stanley said in a research note, adding falling mortgage rates would offer greater support to Hong Kong than Singapore.
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