The HKMA’s Response to the US Fed’s Rate Hike
The Federal Open Market Committee of the Federal Reserve (the Fed)
announced a rate hike of 25 basis points at the early hours today
(Hong Kong time) after its two-day meeting, raising the target range
for the federal funds rate to 4. 75-5%. The Hong Kong Monetary
Authority (HKMA) has adjusted the Base Rate upward to 5. 25% according
to the established mechanism with immediate effect.
The Fed’s
rate-hike decision is consistent with market expectation, but there
will continue to be considerable uncertainties on the interest rate
path in the US. More time is needed to assess the impact of continual
rate hikes in the past year on the US economy and inflation.
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 continue to operate in a smooth and
orderly manner, despite the volatile overseas markets. This is
attributed to the resilience that we have built up in the financial
market over the years, our sound banking system and the effective
operation of the Linked Exchange Rate System. The HKMA will continue
to closely monitor market developments and maintain monetary and
financial stability.
The Hong Kong dollar interbank rates
might remain at elevated levels for some time. Therefore, the public
should be prepared for the movements of banks’ lending rates, and
should carefully assess and manage the relevant risks when making
property purchase, taking out mortgage or making other borrowing
decisions. Hong Kong Monetary Authority 23 March 2023