The US Federal Reserve’s decision to keep interest rates on hold was not a surprise. But what did raise eyebrows was the dissent of three “hawkish” voting members who wanted a rate hike now, a rare split that marked only the fourth time since 1992 that three voters had broken ranks with a majority decision. The rate hold spurred a rally across bonds, equities, industrial commodities and emerging market assets. Hong Kong’s property market, lacklustre for most of last and this year, has seen some signs of a revival in recent weeks. The glacial pace of the Fed’s tightening – whose effects in Hong Kong are transmitted through the Hong Kong-US dollar peg – may well spark another round of property speculation. As the city’s property prices are unlikely to fall sharply anytime soon, the government’s decision to hold off cancelling its cooling-off measures turns out to have been a correct one. Several factors compelled the Fed to hold off raising rates. Domestically, the US economy’s recovery has been underwhelming. The Fed would not risk imperilling it by tightening policy too soon despite the fall in unemployment. Fed Chairman Janet Yellen and her “dovish” allies on the Federal Open Market Committee want to see a more robust labour market at a time when inflation is still off the horizon. At 4.9 per cent, the US jobless rate is where it was at the beginning of the year. The US Fed kept interest rates unchanged ... how will it affect Hong Kong? Overseas, the European Central Bank and the Bank of Japan are pursuing ultra-loose monetary policies. The Fed may feel boxed in as any sustained rate-rise cycle would push up the dollar and threaten US exports. Japan is overhauling its monetary stimulus package by introducing another unconventional tool – a “yield curve control” whereby the government’s 10-year bond yield will be kept practically at zero. At the start of this year, market players anticipated up to four rate increases. Now, there will be at most one in December. Most people have written off an increase in November because of the presidential election in the US. Even if the rate hike cycle starts next year, it is likely to be extremely gradual. But the pressure is building on the Fed to normalise rates, and each delay will lead to more volatility in the capital markets. For now, despite the protestations of the hawks, the doves led by Yellen are holding the line. They have managed to kick the can down the road yet again. It remains to be seen how long they can hold off the day of reckoning.