Joseph Yam Chi-kwong, chief executive of the Hong Kong Monetary Authority, yesterday defended the currency peg with the US dollar against critics who argue that the system threatens to derail economic growth. In his 'Viewpoint' commentary posted on the HKMA Web site yesterday, Mr Yam acknowledged that United States monetary policy was 'imported' through the linked exchange rate system. '[That] may not always be appropriate for Hong Kong, given that the economic cycles of the US and Hong Kong may not always be in sync,' he said. The commentary follows on the decision this week by the US Federal Reserve to raise interest rates by 50 basis points. This will likely trigger a matching increase in Hong Kong rates on Friday to avert a capital flight out of the local currency and into higher-yielding US dollar assets. These developments had raised questions in some circles about the appropriateness of a fixed exchange rate as the objective of monetary policy in Hong Kong, Mr Yam said. 'With Hong Kong dollar interest rates tied closely to those for the US dollar, the concern is of course whether this week's development will undermine the current recovery of the Hong Kong economy,' he said. In anticipation of such a debate, Mr Yam said he had discussed the issue in a previous Viewpoint commentary and concluded that while Hong Kong would best be served by no interest rate rises at all, the cautious approach adopted by the US Federal Reserve was likely to give adequate time for economic recovery to gather greater momentum. 'In a little over a month since then we have certainly seen stronger signs in our economic recovery. Available indicators show the year-on-year growth rate of GDP in the first quarter at possibly double digits, with this momentum likely to be sustained into the second quarter.' This expansion had come despite successive increases in interest rates in recent months, said Mr Yam, and the economy had recovered much more quickly than most analysts expected.