Hong Kong Central Bank HKMA Increases Interest Rate by 0.25% to 5.75%, Following US Fed Interest Rate Increase to 5.25% – 5.55% Range on 26th July 2023
4th May 2023 | Hong Kong
Hong Kong central bank Hong Kong Monetary Authority (HKMA) has increased Hong Kong key interest rate by 0.25% (Base Rate) to 5.75%, following the 0.25% upward adjustment in the target range for the US federal funds rate on 26th July 2023, and 0.5% above the lower end of the prevailing target range for the US federal funds rate is 5.75% (The average of the five-day moving averages of the overnight and one-month HIBORs is 4.78%). The Base Rate is the interest rate forming the foundation upon which the Discount Rates for repurchase transactions through the Discount Window are computed. The Base Rate is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBORs), whichever is the higher. HKD is pegged to US dollar in the range of HKD 7.75 to 7.85 per dollar. HKMA: “Following the 25-basis point upward adjustment in the target range for the US federal funds rate on 26 July (US time), 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 5.75%, while the average of the five-day moving averages of the overnight and one-month HIBORs is 4.78%. The Base Rate is therefore set at 5.75% according to the pre-set formula.” See below for United States FOMC Meeting on 26th July 2023.
” Hong Kong Central Bank HKMA Increases Interest Rate by 0.25% to 5.75%, Following US Fed Interest Rate Increase to 5.25% – 5.55% Range on 26th July 2023 “
Hong Kong Monetary Authority (HKMA) in March 2023: 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.
United States Fed Increased Interest Rate by 0.25% to 5.25% – 5.5% Range, Target Inflation at 2%
FOMC: Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.