HKMA warns high interest rates ‘may last for some time’ as it delays cutting the cost of funds in lockstep with US Fed
- Hours earlier, the HKMA kept Hong Kong’s base rate unchanged for the sixth time at 5.75 per cent in lockstep with the Fed’s move
- In his press conference, the Fed’s Chairman Jerome Powell said that “inflation has shown a lack of further progress toward our 2 per cent objective”
Hong Kong’s monetary authority said high interest rates may “last for some time” because America’s inflation remained stubbornly high, a situation which may weigh on the city’s mortgage borrowers, with the number of negative-equity loans at a 20-year high.
The US Federal Reserve, the anchor of Hong Kong’s monetary policy since 1983, “has not yet gained enough confidence about the US inflation trajectory to start cutting interest rates,” the city’s de facto central bank said in a statement. “The Fed’s future interest rate decisions will be dependent on incoming data, the evolving outlook and the balance of risks.”
“It is likely that gaining greater confidence will take longer than previously expected,” Powell said.
Powell sought to assure the market, saying that it would be “unlikely” for the Fed’s next move to raise rates, adding that officials would need to see “persuasive evidence that policy is not tight enough” before taking action.
Hong Kong’s stock market advanced after the latest move, following the overnight rally in the US bond market that was unleashed by Powell’s assurance. The city’s benchmark Hang Seng Index rose for the eighth day, gaining by as much as 1.5 per cent in recent trading.