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Hong Kong Raises Key Interest Rate in Lockstep With US

The HKMA lifted the overnight discount window rate by 75 basis points to 2.75%, after the Fed increased its rate by the same margin


The Hong Kong Monetary Authority (HKMA) on Thursday raised its base interest rate after the US Federal Reserve delivered a rate increase.
The rises in US interest rates have forced the Hong Kong Monetary Authority to defend its currency peg. File photo: Reuters.

 

The Hong Kong Monetary Authority (HKMA) raised its base interest rate on Thursday after the US Federal Reserve delivered an expected increase.

The HKMA lifted the overnight discount window rate by 75 basis points to 2.75%, after the Fed increased its rate by the same margin.

HKMA chief executive Eddie Yue said on Thursday he expected the city’s overnight and one-month interbank rate to continue to rise, but at a much faster pace.

The monetary policy moves in lockstep with the US as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.

The rises in US interest rates have forced the HKMA to defend the currency peg.

On Tuesday, Hong Kong’s top finance official backed the peg, telling the South China Morning Post: “[The peg] is working within our design. There’s no cause for alarm, we have ample liquidity.”

The Federal Reserve raised the benchmark overnight interest rate by three-quarters of a percentage point.

The move came on top of a 75 basis point rise last month and smaller moves in May and March, as the Fed stepped up efforts to cool inflation.

Fed chairman Jerome Powell told a news conference following the rate announcement that he did not believe the US economy is currently in a recession but that it is softening.

 

  • Reuters, with additional editing by George Russell

 

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.