HKMA raises base rate by a quarter point to 4.25%, the first increase since 2023
Hong Kong’s de facto central bank increased its base rate by a quarter of a percentage point on Thursday after the US Federal Reserve raised the federal funds target range to rein in inflation amid conflict in the Middle East. The Hong Kong Monetary Authority (HKMA) raised the city’s base rate to 4.25 per cent hours after the Fed lifted its target to a range of 3.75 per cent to 4 per cent after…
The Hong Kong Monetary Authority (HKMA) recently raised its base interest rate by a quarter point to 4.25%, marking the first increase in three years. The decision was made in response to rising inflation and following the US Federal Reserve's own interest rate hike. HKMA chief Eddie Yue Wai-man stated that the move would likely weaken the Hong Kong dollar against the US dollar due to the widening gap between US and HK interest rates, potentially encouraging investors to move their assets into US dollar investments to earn higher yields.
Despite the higher borrowing costs, Yue reassured that the overall bad-debt risk in Hong Kong remains low, with the bad-loan ratio having decreased since late last year as the property market stabilised. The HKMA's decision came in the wake of the Fed's rate hike, with the Fed now targeting a range of 3.75% to 4% for the federal funds rate.
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