Norman T.L. Chan, Chief Executive, Hong Kong Monetary Authority
Last night, the US FOMC raised its policy rate by 25 basis points. This morning, the HKMA also adjusted our Base Rate for the Discount Window by 25 basis points to 2.25%.
The Fed has raised the median projection of interest rate hike to four times in 2018. This is not surprising at all because:
US economy continues to have solid growth;
US labour market continues to tighten; and
Inflation appears to be on a rising trend.
Under the Linked Exchange Rate System, HKD interest rates will rise as US monetary policy continues to normalise. The HKMA does not actively manage HKD interest rates. The rise in HKD interest rates will occur through money flowing out of the HKD. With one-month HIBOR now over 1.5%, the trend of a rising HIBOR is clear. I believe it is just a matter of time that banks increase their savings deposit rate and Best Lending Rate.
Many people are concerned about the overheating of Hong Kong’s property market. HKD interest rate normalisation will be conducive to a more healthy development of the asset markets, including the property market. But some volatility is unavoidable in the process. The HKMA would like to remind the public, once again, to manage their interest rate risks and market risks prudently.