The Hong Kong Monetary Authority (HKMA) on Thursday (March 23) lifted its base rate charged through the overnight discount window by 25 basis points to 5.25%, hours after the US Federal Reserve (Fed) delivered a rate rise of the same margin.
Hong Kong’s monetary policy moves in lock-step with the US, as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.
“The Fed’s rate-hike decision is consistent with market expectations, but there will continue to be considerable uncertainties on the interest rate path in the US,” the HKMA said in a statement.
The Fed on Wednesday (March 22) raised interest rates by a quarter of a percentage point, but indicated that it is on the verge of pausing further increases in borrowing costs after the recent collapse of two US banks.
The Federal Open Market Committee policy statement also said the US banking system is “sound and resilient”.
The HKMA said: “Individual banks in the US had exhibited financial health and liquidity problems recently, which might result in credit tightening.
“It is too soon to assess how much this will further affect economic activities and influence monetary policy.”
The financial and monetary markets of Hong Kong continued to operate in a smooth and orderly manner, despite the volatility in overseas markets, and Hong Kong dollar interbank rates might remain at elevated levels for some time, the HKMA added.
