HONG KONG: HKMA (Hong Kong Monetary Authority) on Thursday augmented its base rate incorporated through the overnight discount phase by 25 basis points, up to 5.25%, following the US Federal Reserve’s announcement of an augmentation of rates by the same margin.
Overnight, the country’s interbank rate eased to 1.94905% on Thursday from a low of 44.9 basis points the day before. A four-month high of 4.14286% was observed on Tuesday, highlighting a cash squeeze that is near the outcome of the Fed’s policy meeting and a phasal demand for Hong Kong dollar funding.
The lockstep of monetary policy is the same for both Hong Kong and the US. Hong Kong’s currency is expected to be the dollar, in a range of 7.75 to 7.85 per dollar.
As per HKMA, “Although the Fed’s rate-hike decision is consistent with market expectations, there will still be a great deal of uncertainty regarding the direction of interest rates in the US.”
“Single banks in the US have recently displayed financial health and liquidity problems, which may result in credit tightening,” according to HKMA.
The best lending rate in Hong Kong was initiated by HSBC Holdings 0005.HK, that was kept unchanged at 5.625%. A quarter of a percentage increase in the interest rates were made by the Federal Reserve on Wednesday.
It however mentioned that it would not adhere to a further increase in the costs incurred in borrowing following the two US banks collapse this month.
US banking, according to the Federal Open Market Committee policy statement, was “sound and resilient”.
HKMA mentioned, “It is too soon to assess how much this will further affect economic activities and influence monetary policy.”
Despite the vulnerable overseas market, Hong Kong’s financial and monetary markets operated quite smoothly, even though the country’s dollar interbank rates remained at a higher level in recent times.
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