Hong Kong Monetary Authority - Remarks after the US Fed FOMC Meeting

Speeches

02 Feb 2023

Remarks after the US Fed FOMC Meeting

Eddie Yue, Chief Executive, Hong Kong Monetary Authority

The Federal Open Market Committee (FOMC) 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 4.5-4.75%. The HKMA has adjusted the Base Rate upward to 5% according to the established mechanism with immediate effect.
Since March last year, the Fed has raised interest rates consecutively by a total of 450 basis points. The pace of rate hike has further moderated since the last rate decision. This reflects the need for the Fed to more carefully assess the US economic and inflationary trends, as well as the effect of previous rate hikes, in determining the magnitude and pacing of future hikes.
Rate hikes in the US will not affect the financial and monetary stability of Hong Kong. Our monetary and financial markets continue to operate in a smooth and orderly manner. The Linked Exchange Rate System (LERS) and the automatic interest rate adjustment mechanism under the LERS also continue to work well. The mechanism is well understood by the market, which continues to have strong confidence in the LERS.
The rate hike cycle in the US has not yet been completed. The Hong Kong dollar interbank rates might remain at elevated levels for some time. Therefore, the public should be prepared for the likelihood that banks’ lending rates may go further higher, and should carefully assess and manage the relevant risks when making property purchase, taking out mortgage or making other borrowing decisions.
The HKMA will continue to closely monitor market situation and maintain monetary and financial stability in Hong Kong.

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