No change to HK borrowing costs after Fed's pause
The Hong Kong Monetary Authority (HKMA) on Thursday left its base rate unchanged at 5.75 percent in a lockstep move with the US Federal Reserve. The US Fed had unanimously voted to keep its target rates unchanged at a 23-year high of 5.25-5.5 percent, given the country’s sticky inflation situation. In a statement, the HKMA said the Fed’s future interest rate decisions would be dependent on incoming data, the evolving outlook, as well as the balance of risks. “The dot plot released after the meeting indicated that the Fed might cut rates three times for a total of 75 basis points this year, but the actual timing and the interest rate path thereafter remain uncertain and the high interest rate environment may last for some time,” the HKMA said. The HKMA also reassured citizens that the city’s financial and monetary markets continued to operate in a smooth and orderly manner, but it again warned that the city’s interbank rates, or Hibor rates, “might remain high for some time”, and people should carefully assess their mortgage or borrowing risks. The city’s one-month Hibor, which is related to local mortgage rates, stood at around 4.6 percent on Wednesday, down from nearly 5 percent in January; while the three-month Hibor, which determines corporate loans, fell to 4.7 percent. Following the latest rate decisions, the city’s largest commercial lender HSBC said it would maintain its prime lending rate unchanged at 5.875 percent. “The Asian stock markets have been weighed on by the interest rate hikes since 2021, significantly losing to the US equity markets, but in the future Asian shares instead might be the ones benefiting the most as the US enters a rate cut cycle while global capital returning to Asia,” Bella Liang, chief investment officer at Hang Seng Bank, commented.