MacroscopeHow dollar peg and mainland inflation policy will help Hong Kong keep price rises in check

Hong Kong consumers will not be totally spared from rising prices as policy decisions at home and elsewhere take effect

Even so, Beijing’s commitment to curbing inflation and the Hong Kong dollar’s reliable peg should insulate the city from the worst effects

3-MIN READ3-MIN

Fresh vegetables for sale at a market in Central on November 22, 2021. Compared to many economies, inflationary pressure in Hong Kong is fairly benign. Photo: Nora Tam

Published: 2:30pm, 11 Jan 2022

Rising prices are giving policymakers in many jurisdictions cause for concern. The prospect that the US Federal Reserve will quicken the pace of monetary policy tightening could add to those concerns.

Such tightening could lead the US dollar to outperform, pushing up dollar-denominated prices of food and energy in other currency terms. Fortunately, Hong Kong is well placed to avoid some of this upward price pressure.

That is not to say that Hongkongers will avoid higher prices. The start of 2022 has already seen higher transport and electricity costs in the city.

There is also clearly a short-term risk of higher food prices with Cathay Pacific slashing cargo and passenger flights for the rest of January. That move followed the introduction of tighter quarantine requirements for aircrew as Hong Kong continues to try to keep Covid-19 at bay.

In terms of transport, Citybus and New World First Bus have raised the price of journeys by another 3.2 per cent this year under the final phase of a previously agreed government-approved fare adjustment plan.

Meanwhile, people in Hong Kong are receiving less money under the government’s public transport subsidy scheme that is operated in conjunction with stored-value Octopus cards.