HKMA cautions on interest rate outlook, while most traders see cuts in September
- ‘The Fed could still move two times this year if inflation figures continue to soften,’ JP Morgan strategist says
The Hong Kong Monetary Authority (HKMA) cautioned the public that high interest rates may persist for some time following the US Federal Reserve’s most recent rate decision, while most traders still expect cuts to begin in September.
“With recent economic data showing mixed signs and inflation remaining high, when the Fed will start cutting interest rates is still uncertain,” the city’s de facto central bank said in a statement on Thursday. “The high interest rate environment may last for some time.”
Hong Kong interbank rates rose slightly on Thursday morning. The one-week Hibor, or Hong Kong interbank offered rate, rose to 4 per cent, up 3.6 basis points from a day earlier, according to data from the Hong Kong Association of Banks. The one-month Hibor was flat, while the three-month Hibor rose 0.4 basis points to 4.734.
The HKMA has followed US rate decisions in lockstep since 1983 when it pegged the local currency with the US dollar.
In a press conference, Fed Chairman Jerome Powell said the central bank does not yet have the confidence to lower interest rates. Even though inflation has fallen from a peak of 9.1 per cent in mid 2022 to 3.3 per cent in May, it remains above the US central bank’s 2 per cent target.