Hong Kong holds base rate at 5.75% after Fed’s unanimous vote to keep watching for signs of slowing US inflation
- Hong Kong Monetary Authority left its base rate at 5.75 per cent on Thursday, hours after the US Federal Reserve voted unanimously to maintain its watchful stance
- Analysts have pushed back bets on a US rate cut to June meeting, while Hong Kong lenders could start cutting their prime rates later this year
The Hong Kong Monetary Authority (HKMA) left its base rate at 5.75 per cent on Thursday. Hours earlier, the Fed voted unanimously to maintain its target rate at the 23-year high level of 5.25 per cent to 5.5 per cent for the fifth straight meeting.
The Fed’s statement after their second meeting of 2024 was nearly identical to January’s, maintaining the guidance that rate cuts would not be appropriate until there is more confidence that US inflation is moving sustainably toward their 2 per cent target.
The HKMA has followed the Fed’s rate decision in lockstep since 1983 by design under its linked exchange rate system to preserve the local currency peg’s to the US dollar. The HKMA has held its base rate at current level after raising it 11 times from March 2022 to July 2023 to the highest level since December 2007.
“A rate cut is likely only a matter of timing for the Fed and HKMA, as everyone is waiting for US inflation to cool off,” said the Shanghai Commercial Bank’s Hong Kong head of research Ryan Lam Chun-wang before the rate decisions were announced. “We have passed peak rates” in this tightening cycle, he added.