UNSURPRISINGLY, the Fed pushed up fund rates and discount rates, and the major US banks followed by raising their best lending rate. Inevitably, Hong Kong banks will have to follow. While this is a welcome move, far-sighted bankers should have started to re-calculate their asset and liability matrix. However, there were no sighs of relief from bankers after rates were freed from the grip of uncertainty. Bankers, in pricing their assets and planning future lendings, will have difficulty forecasting how much rates should rise and when. They maintain that the rate rise will not have an adverse impact on bank profitability because the profit margin will remain intact. However, with the possible dampening of consumer finance, which is on a much higher rate than even the mortgage lending rate, the most profitable form of lending may face a squeeze. Most notable are the no-purpose personal loans and credit card loans which bear an annualised percentage rate of more than 20 per cent. Though demand for funds from the infrastructural projects in Hong Kong and China is still strong, the pricing of such loans is based on the much-lower HIBOR (the Hong Kong Inter-bank Offered Rate). The only comfort for bankers is that depositors will have more incentive to place their money with banks. With a more stable source of deposits, bankers are less worried about any maturity mismatches. Yet this comfort will be slowly eroded as the interest rate agreement on time deposits is phasing out. Statistics have shown that a time deposit of more than one month in maturity rose 50 basis points on average. These customer deposits will never be as cheap as they were before deregulation. While it is true that the rate rise will not lead to any major adverse impact, there are more uncertainties than ever, and bankers hate that. There is simply no end of such uncertainty in sight. The local bond market will soon find itself desperately looking for direction again as the big rate increase did not bring any assurances of a reasonably long breathing space.