Hong Kong holds base rate at 4.25% after US Federal Reserve decision

The Hong Kong Monetary Authority (HKMA) declared on Thursday that it would maintain its base rate at 4.25 per cent, shortly after the US Federal Reserve announced a similar decision to keep its benchmark rate steady. As Hong Kong's currency is pegged to the US dollar, the city's de facto central bank frequently mirrors the US Fed's moves.

In September, the HKMA raised its key interest rate by 0.25 per cent, the first such increase since 2023, following the Fed's move. The US Federal Open Market Committee (FOMC), chaired by Kevin Warsh, voted to maintain its target range for interest rates between 3.75 per cent and 4 per cent on Wednesday. Market analysts had placed the odds of a rate hike at the meeting at less than 10 per cent.

Jenny Zeng, chief investment officer for fixed income at Allianz Global Investors, cautioned that while the Fed's pause might be perceived as a shift, the tightening cycle is not over. She highlighted that inflationary pressures persist due to higher energy prices and strong AI-related investment. Energy costs, particularly petrol prices, have increased significantly in September. The Fed's next meeting is scheduled for early December.