THE Hong Kong Association of Banks (HKAB) has decided that the relatively liquid interbank market and stable exchange rate do not warrant an adjustment in the deposit rate levels. ''There is no change in the Hong Kong dollar against US dollar rate at all. The interbank rate was very much unmoved,'' association secretary Philip Martin said yesterday of the no-action decision. Overnight interbank rate, the equivalent of the US Federal funds rate which stands at 3.75 per cent, stayed at rather low levels during the week, closing at 2.5 per cent yesterday. ''The funding needs in the interbank market were low and the rate did not move up in accordance with the Fed funds rate. As the margin between savings rate and interbank rate remains the same, there is no need for an increase,'' said Joseph Yam Chi-kwong, chief executive of the Monetary Authority. Banks usually place their excessive funds in the inter-bank market. An upward movement in the market rate would widen its gap with the savings rate and would eventually trigger an interest rate rise to maintain the margin. ''Unlike last time when HKAB decided to raise interest rate, the interbank rate this time did not move up and stabilise on the level corresponding with the Fed funds rate,'' Mr Yam said. Under the linked exchange rate system, when Hong Kong's inter-bank market rate is lower than that in the US, the Hong Kong dollar should weaken against the US dollar. Yet that is not the case, meaning that people are still willing to sit on Hong Kong dollars. ''If the rate of investment in US dollars is the same as in Hong Kong dollars, this saying will be true,'' Mr Yam said. However, stockbrokers are still convinced an interest rate rise is imminent. The stock market rebounded to close above the 9,000-point mark yesterday, but the near-term outlook remains bearish. The index futures market was sold down heavily at the end of trading to close at a slight discount to the cash market. Brokers said the decision of the bank association not to raise interest rates should help support the market, but added that concerns over property stocks would overshadow market sentiment. Traders described yesterday's rebound as a dead cat bounce and said the outlook for next week was quite bearish.