US inflation-fighting interest rate increase will mean higher Hong Kong borrowing costs and no cut in fuel prices, experts predict
- Economists say fuel, imports from US unlikely to be cheaper after Federal Reserve increases benchmark interest rate by 0.75 per cent
- Car salesman, however, said interest rate rise will probably not affect demand for new vehicles
The US Federal Reserve’s bid to rein in inflation with another 0.75 percentage point hike in its benchmark interest rate could yield little consumer relief in Hong Kong, with economists warning the city’s car drivers would be unlikely to benefit from a possible fall in oil prices because of the oligopoly market in the city.
Economists added the city’s currency-peg policy, which fixes Hong Kong’s dollar at about 7.80 to the US one, meant residents would face higher borrowing costs alongside their American counterparts.
They also said US imports were also unlikely to become cheaper, even if the Fed’s bid to curb inflation was successful.
“It is the third consecutive 0.75 point rise. Hongkongers will soon begin to feel the impact of these moves in recent months,” said Billy Mak Sui-choi, an associate professor at Baptist University’s department of finance and decision sciences.
“Higher interest rates will raise the cost of borrowing, whether you take out a home mortgage or car loans.”
Nutritionist Angela Lee said her decision not to take out a loan to buy a new seven-seater car gave her a narrow escape from another interest rate hike. She instead signed off on a used one last month, with full payment.