Hong Kong central bank raises rates, warns of tighter interbank market

HONG KONG, July 28 (Reuters) – The Hong Kong Financial Authority (HKMA) on Thursday raised its base price charged by means of the in a single day low cost window by 75 foundation factors to 2.75%, hours after the U.S. Federal Reserve delivered a price hike of the identical margin.

Hong Kong’s financial coverage strikes in lock-step with that of the USA as the town’s foreign money is pegged to the buck.

HKMA chief govt Eddie Yue mentioned he expects the town’s in a single day and one-month interbank charges, in addition to short-term charges, to speed up at a a lot sooner tempo.

“With funds flowing out from the Hong Kong greenback system, the rate of interest automated adjustment mechanism will kick in, driving the Hong Kong greenback interbank charges to regularly rise and monitor the U.S. greenback charges,” Yue mentioned.

“It will assist offset the incentives for carry commerce and stabilise the Hong Kong greenback inside the 7.75 and seven.85 vary,” he added, referring to the tight band of the town’s peg to the U.S. greenback.

Quickly after, Finance Secretary Paul Chan informed reporters the town’s property market, the place properties are among the many least reasonably priced on this planet, had “sturdy underlying demand” and will stand up to greater rates of interest.

“The fundamentals of our property market stay resilient, though the sentiment will likely be dampened due to the elevated mortgage funds and the expectation of the speed to go up additional,” Chan mentioned.

He added Hong Kong banks additionally had ample liquidity, in addition to low publicity to property builders in mainland China that are going through a extreme downturn.

Hong Kong non-public dwelling costs fell at a sooner tempo in June and dropped to the bottom since December 2020, official information confirmed on Wednesday, as homebuyers stayed on the sidelines as a result of an unsure outlook. learn extra

One month Hibor HIHKD1MD= – the Hong Kong Interbank Provided Price, a benchmark used for pricing mortgages – final week rose to its highest since Might 2020.

The Federal Reserve raised the benchmark in a single day rate of interest by three-quarters of a proportion level. The transfer got here on prime of a 75 foundation level hike final month and smaller strikes in Might and March, because the Fed stepped up efforts to chill inflation. learn extra

Fed Chairman Jerome Powell informed a information convention following the speed announcement that he didn’t imagine the U.S. financial system is at present in a recession however that it’s softening.

Reporting by Donny Kwok and Kiki Lo; Enhancing by Kenneth Maxwell and Kim Coghill

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