June interest rate rise likely the last this year, says HSBC adviser

The widely anticipated US Federal Reserve interest rate rise, expected to take place within the next two weeks, will be the last adjustment this year, according to George Leung Siu-kay, an adviser to HSBC Asia-Pacific.

Leung’s comment came as the Fed indicated in minutes from a previous meeting that the policy meeting to be held on June 14 is likely to result in a tightening of monetary policy. The market is expecting an increase of less than 0.25 per cent in the base rate, after it was raised by 0.25 per cent in March.

Speaking at the Wise Business Summit in Hong Kong on Monday, Leung said the chance of another interest rate increase, as expected by the market, before the end of 2017 is “very low”.

“The US economy is not facing inflation problems, which is usually the main reason why the Fed adjusts the interest rate,” Leung said. “The US is also in need of more lending and spending activity to boost the economy for the government’s new plans.”

Leung said the fact US employers had recorded a 1.9 per cent increase in the costs of compensating their staff has led to an almost flat inflation level.

He also said the US$1 trillion infrastructure plan and the low-tax proposal laid out by Donald Trump’s administration meant the country would need an active economy to meet the costs.