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