Editorial | Borrowers to feel the pinch as wave of rate rises hits local shores
- The impact of the US Federal Reserve’s latest move will be felt around the globe, Hong Kong and mainland China included, but it is efforts to stem the spread of the coronavirus that weigh most heavily on growth
Local commercial banks have absorbed the rises instead of passing them on to customers in their prime lending rates.
The rate-rise holiday has ended, however. The latest 75-basis-point increase in the US Federal Reserve’s benchmark rate, which is mirrored by the Hong Kong Monetary Authority (HKMA), is now spilling over to the city’s households and corporate borrowers.
The city’s biggest bank, HSBC, took the lead by raising its best lending rate for the first time in four years, by 12.5 basis points to 5.125 per cent.
While they have been spared some of the higher cost of money, it is important for borrowers to note that they are no longer insulated from the global inflation/rate rise cycle.
With Federal Reserve chairman Jerome Powell having pledged not to let up on rate rises until US inflation falls to 2 per cent from 8.3 per cent in August, economists see no relief until the end of 2023.
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US Federal Reserve authorises another big rate hike in bid to curb inflation
After the Fed/ HKMA moves, Financial Secretary Paul Chan Mo-po said Hong Kong’s negative growth in the first half was likely to extend for the whole year. The rate hike will weigh on the property and stock markets and on borrowing costs for businesses and ordinary people, with smaller businesses probably taking a harder hit.