Key Information

inSight
Speeches
Speeches by Speaker
Norman T.L. Chan
Peter Pang
Eddie Yue
Arthur Yuen
Raymond Li
Edmond Lau
Esmond Lee
Meena Datwani
Vincent W.S. Lee
James Lau
Joseph Yam
Y K Choi
William Ryback
David Carse
Tony Latter
Andrew Sheng
Hans Genberg
Simon Topping
Michael Taylor
The Honourable Donald Tsang
Chen Yuan
Dai Xianglong
Don Brash
Jaime Caruana
Andrew Crockett
Mario Draghi
David Eldon
Stanley Fischer
Timothy F. Geithner
Stephen Grenville
Kenneth G. Lay
William McDonough
Ernest Patrikis
Glenn Stevens
Jean-Claude Trichet
Tarisa Watanagase
Zeti Akhtar Aziz
Press Releases
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
Press Releases by Category
Bogus Voice Message Phone Calls
Banking in Hong Kong
Fraudulent Websites, E-mails and Telephone System, and other fraud cases
Granting of Banking Licences
Exchange Fund
Table of Multiples of Notes and Payments for Allotted Amount under non-competitive tender
Table of Multiples of Notes and Payments of Application Amount under non-competitive tender
Tender of Exchange Fund Bills and Notes
Tender Results of Exchange Fund Bills and Notes
Tentative Issuance Schedule for Exchange Fund Bills and Notes
Appointments and Departures
HKMA Pay Review
HKMA Publications
Speeches
The Hong Kong Mortgage Corporation
Hong Kong Note Printing Limited
Hong Kong Institute for Monetary Research
Exchange Fund Investment Limited
Others
Hong Kong Financial Infrastructure
International Relations
Investment Products Related to Lehman Brothers
Monetary Policy
Notes and Coins
Renminbi business
Credit Card Lending Survey
Monetary Statistics
Residential Mortgage Survey
Year 2000
Others
Guidelines and Circulars
Guidelines
Circulars
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
359.3404

Speeches

Statement by Norman T. L. Chan, Chief Executive of the Hong Kong Monetary Authority to the media on 15 December 2016

(Full version)

  1. The FOMC decided last night to raise the Fed funds target rate by 25 basis points.  This morning, the HKMA also raised the Base Rate of the Discount Window by 25 basis points to 1.00%. 
  2. While the Fed’s move to raise rate yesterday was widely anticipated, the market focus has shifted to the pace of US monetary policy normalisation going forward. Although the Fed anticipated a gradual path of increases in the federal funds rate in the next three years, I believe we should pay attention to the following three factors influencing the US inflation and interest rate movements:

i.  The US labor market continued to strengthen, with unemployment rate in November declining to 4.6%, the lowest level in more than nine years.  In the period ahead, the upward pressure on wages in the US might become more pronounced, which may translate into upward pressure on consumer prices;

ii.  Recently energy and commodity prices have stabilized and appeared to trend higher.  This would exert rising pressure on consumer prices and inflation in the US. 

iii.  The incoming US administration announced plans to cut tax and increase infrastructure spending.  In the short run, the expectation of such policy changes may stimulate consumption and boost economic growth.

  1. It is noticed that the 10-year US Treasury yields rose from a low of 1.36% in July to 1.83% before the US election, and have risen after the US election to a high of 2.57% recently.  This reflects a shift in US inflation expectations in the market.
  2. The pace of US monetary policy normalization is set to have some impacts on capital flows, exchange rates and asset prices in the global market.  Under the Linked Exchange Rate System, Hong Kong has experienced a strong capital inflow since 2008, which amounts to over US$130 billion.  The Monetary Base has expanded substantially to HK$1.6 trillion, which has provided the banking sector in Hong Kong with ample liquidity and drove the interbank interest rates to very low levels.  Nonetheless, one would notice that the 1-month HIBOR had already increased from a low of 0.24% in early September to 0.66% yesterday.  If the USD interest rates continue to rise in the future, the interest rate differentials between the USD and the HKD will widen, and at some stage the widened interest rate differentials  will lead to selling HKD/buying USD flows and the HKD exchange rate will ease and consequently reach the weak-side Convertibility Undertaking rate of 7.8500. The Monetary Base will shrink gradually as a result, leading to increases in HKD interbank interest rates.  However, the rising trend in the HKD interbank interest rates is likely to be gradual, depending on the scale of outflows from HKD, international developments and other related factors.  It will be difficult to forecast precisely the pace of increases in HKD interest rates in the wake of considerable uncertainties over the path of US monetary policy normalization.
  3. I would like to remind the pubic to stay vigilant and prepare for the market volatility and risk that may arise from the normalisation of USD and HKD interest rates going forward. 
Last revision date: 15 December 2016
ABOUT THE HKMA
The HKMA
Tender Invitations
Careers@HKMA
Legislative Council Issues
Links
The HKMA Information Centre
KEY FUNCTIONS
Monetary Stability
Banking Stability
International Financial Centre
Exchange Fund
PUBLICATIONS & RESEARCH
Annual Report
Half-Yearly Monetary & Financial Stability Report
Quarterly Bulletin
HKMA Background Briefs
Reference Materials
Research
MARKET DATA & STATISTICS
CMU Bond Price Bulletin
Economic & Financial Data for Hong Kong
Monthly Statistical Bulletin
Monetary Statistics
KEY INFORMATION
Press Releases
Speeches
Guidelines & Circulars
Forthcoming Events
inSight
OTHER INFORMATION
Account Opening
Consumer Corner
Consumer Education Programme
Complaints about Banks
Complaints about SVF Licensees
Internet Banking
Fraudulent Bank Websites, Phishing E-mails and Similar Scams
Be Careful of Bogus Phone Calls and SMS Messages
Authenticate the Callers and Bank Hotline Numbers
Register of AIs & LROs
Register of Securities Staff of AIs
Register of SVF Licensees
Investment Products Related to Lehman Brothers
Photo Gallery