HKMA warns of uncertainties after raising rates
The chief executive of the Hong Kong Monetary Authority (HKMA), Eddie Yue, on Thursday warned about considerable uncertainties over the city's future borrowing costs, though he noted the SAR's bad debt ratio had remained stable. This came after the city's de facto central bank raised its base rate by a quarter of a percentage point to 4.25 percent, hours after the US Federal Reserve lifted its…
Eddie Yue, the chief executive of the Hong Kong Monetary Authority (HKMA), warned on Thursday about significant uncertainties surrounding the city's future borrowing costs, according to a Reuters report. Despite raising its base interest rate by 0.25 percentage points to 4.25%, the SAR's bad debt ratio remained unchanged. This action came just hours after the U.S. Federal Reserve increased its target range by the same margin, to between 3.75% and 4.0%.
HSBC, Bank of China (Hong Kong), and Standard Chartered announced they would maintain their lending and savings rates unchanged. The Fed and HKMA's rate hikes marked their first in over three years, following a similar increase in July 2023. Speaking at a press conference, Yue emphasized that the Fed's decision aligned with market expectations, reflecting U.S. policymakers' concerns over inflation.
He noted that US interest rate adjustments are prone to considerable uncertainties, potentially impacting Hong Kong's interest rate environment.
Yue explained that the city's base rate outlook would hinge on factors like the HKD-USD interest rate differential, supply-demand conditions for the local currency, and capital market activities. Regarding local deposit and lending rates, he noted that lenders would consider funding cost structures and local currency supply and demand.
The HKMA's monetary and financial markets have maintained an orderly operation, he added, with Hong Kong's bad debt ratio easing since the end of last year. The property market, Yue reported, remained stable, including in the commercial sector, and local lenders have provided substantial provision supports.
Financial Secretary Paul Chan commented that abundant money supply in the local market counters the need for interest rate hikes. The interbank rate is close to 1 percentage point below the US rate, resulting in minimal pressure to adjust interest rates. Meanwhile, Yue discussed the HKMA's intention to increase gold holdings in its Exchange Fund to reduce risks through diversification.
He also hoped this strategy would bolster participation in spot and other financial products markets, aligning with the government's aim to develop the Hong Kong gold market and commodities.
Written by urgent.news from RTHK News - Finance's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
- HKMA warns of uncertainties after raising rates news.rthk.hk
