Composite Interest Rate : End of January 2007

Press Releases

21 Feb 2007

Composite Interest Rate : End of January 2007

The Hong Kong Monetary Authority (HKMA) announced today (Wednesday) the composite interest rate at the end of January 2007.1

The composite interest rate, which reflects the average cost of funds of banks, was steady at 2.86% at the end of January 2007, the same as that of December 2006 (see Chart 1 in the Annex). This followed a decline of 16 basis points in December 2006. During January 2007, longer term interbank and time deposit rates increased but short-term rates fell, while savings deposit rates were unchanged (see Chart 2 in the Annex).2

"The composite interest rate remained steady in January 2007. However, interbank rates have edged up towards the end of the month and in the early part of February 2007. If these increases persist, we may see an increase in the composite rate," said Mr Peter Pang, Deputy Chief Executive of the HKMA.

Since US interest rates began increasing in the middle of 2004, the composite interest rate has increased by 262 basis points, compared with the upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks by the end of January 2007.

The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of January 2007 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 19 March 2007 and will provide the composite interest rate at the end of February 2007.

For further enquiries, please contact:
Hing-fung Wong, Officer (Press), at 2878 1802 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
21 February 2007

1 The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest bearing liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and Hong Kong dollar non-interest bearing demand deposits on the books of banks. Data from retail banks, which account for about 90% of the total customers' deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.

2 During January 2007, the overnight HIBOR declined by 9 basis points while HIBORs for funds with maturity of one week and more rose by 3 to 41 basis points. On a monthly average basis, HIBORs fell for funds with maturity of one month or less by 8 to 27 basis points, while those for funds with maturity over one month rose by 3 to 17 basis points.

Annex

Chart 1

Chart 1
*End-of-period figures.

Chart 2

Chart 2
*End-of-period figures.

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Last revision date : 21 February 2007