HKMA to raise interest rates by 25 basis points

The Hong Kong Monetary Authority (HKMA) announced this morning (Wednesday, 26 March 1997) an increase in the key interest rates, the Liquidity Adjustment Facility (LAF) rates, by 25 basis points with immediate effect.

In line with the 25 basis points increase in the US Fed Funds Target Rate announced by the Federal Open Market Committee last night, the HKMA increased the LAF bid and offer rates to 4.25% and 6.25% from 4% and 6% respectively.

The HKMA has changed the reference rate for setting the LAF rates to the US Fed Funds Target Rate from the US Discount Rate since September 1996, with a view to aligning the LAF bid and offer rates more closely in line with the US dollar market interest rates.

The determination of the best lending rate and interests rates on deposits with maturities of seven days or more is a matter for individual banks. The interest rates on retail deposits with maturities of less than seven days will be determined by the Hong Kong Association of Banks, having regard to the action taken this morning by the HKMA.

Hong Kong Monetary Authority
26 March 1997