Hong Kong central bank cuts interest rate tracking Fed move, banks follow (updated)

Boc Hong Kong Holdings

19/12/2024 02:45

(Add banks' move in paragraph 2, HSBC comment in paragraphs
3-4)
       HONG KONG, Dec 19 (Reuters) - The Hong Kong Monetary
Authority (HKMA) on Thursday cut its base interest rate charged
via the overnight discount window by 25 basis points to 4.75%,
tracking a move by the U.S. Federal Reserve.
    Major Hong Kong banks followed with reductions, but some at
a smaller magnitude. HSBC  0005.HK  cut its Hong Kong dollar
best lending rate by 12.5 basis points to 5.25% and Bank of
China (Hong Kong) lowered its Hong Kong dollar prime rate to
5.25% from 5.375%.
    "The future path of rates remains highly uncertain going
into 2025," HSBC's Hong Kong CEO Luanne Lim said in a statement.
    "HSBC has decided to lower its Hong Kong dollar deposit and
lending rates following another US rates cut, bringing a
cumulative reduction of 62.5 basis points since this September,"
she added.
    Hong Kong's monetary policy moves in lock-step with the
United States as the city's currency  HKD=D3  is pegged to the
greenback in a tight range of 7.75-7.85 per dollar.
    The Fed lowered its policy rate by a quarter of a percentage
point, a decision Federal Reserve Chair Jerome Powell described
as a "closer call," and said a slower pace of projected rate
cuts next year reflected higher inflation readings in 2024.
    "The pace of (U.S.) interest rate cuts remains uncertain as
it is dependent on U.S. inflation and labour market data
developments, and economic activity may also be influenced by
fiscal, economic and trade policies," HKMA Chief Executive Eddie
Yue told reporters. 
    Yue said Hong Kong interest rates could remain at relatively
high levels for some time, and the extent and pace of future
interest rate cuts was subject to considerable uncertainty. The
public should manage interest rate risk when making property
purchases, mortgage or borrowing decisions, he added.
    Hong Kong's financial and monetary markets continue to
operate in a smooth and orderly manner, while market liquidity
conditions remain stable and the Hong Kong dollar exchange rate
is steady, HKMA said. 

 (Reporting by Hong Kong Newsroom; Editing by Leslie Adler,
Edwina Gibbs and Jamie Freed)
 ((donny.kwok@thomsonreuters.com; +852 3462 7745; Reuters
Messaging: donny.kwok.reuters.com@reuters.net))