[Reuters, Hong Kong 19th]-The Hong Kong Monetary Authority (HKMA, equivalent to the Central Bank) announced on the 19th that it lowered the basic interest rate, which is the policy interest rate, by 25 basis points (bp) to 2.25%. Measures following a rate cut by the Federal Reserve Board (FRB).
The Hong Kong government has adopted a “dollar peg system” that keeps the exchange rate of the Hong Kong dollar against the US dollar within the range of 1 dollar = 7.75-7.85 dollars.
The FRB decided at the Federal Open Market Committee (FOMC) on the 17th to 18th to 7: 3 to lower the federal fund (FF) interest rate target by 25bp to 1.75-2.00%.
The rate cut by HKMA is the second time this year following the previous month. The previous month's rate cut followed the FRB, the first since the global financial crisis of 2008/09.
HKMA President Norman Chan touched on protests in Hong Kong more than three months ago: “I hope that order will be restored as soon as possible, and that corporate, economic and financial activities will return to normal. " “This will allow Hong Kong to respond appropriately to difficult situations in general,” he continued.
The president also explained that HKMA is working with the banking industry to ease the upward pressure on SME borrowing costs. The Hong Kong economy is expected to enter a recession in the third quarter.
Major banks in Hong Kong, such as HSBC <HSBC.L> <0005.HK>, will decide whether or not to lower the loan interest rate in response to HKMA rate cuts. The Governor expressed the view that commercial banks may not cut interest rates.
“In the long term, interest rates in Hong Kong should follow US dollar interest rates, but short-term interest rate movements are affected by the supply and demand of Hong Kong dollars,” he said.
The latest Hong Kong dollar is HK $ 7.8243, 0.08% higher than the previous day.
