In this Oct 24, 2008 photo, a pedestrian walks past the building housing Hong Kong Monetary Authority's office in Hong Kong. (TED ALJIBE / AFP)
HONG KONG – The Hong Kong Monetary Authority on Thursday raised its base rate charged through the overnight discount window by 75 basis points to 2 percent, hours after the US Federal Reserve delivered a rate hike of the same margin.
In a statement, the HKMA said the "base rate was adjusted upward to 2.00 percent with immediate effect according to a pre-set formula."
READ MORE: US Fed raises rates by 75 basis points, biggest hike since 1994
Following the HKMA's announcement, HSBC Holdings and Standard Chartered Bank said they would leave their best lending rates unchanged at 5 percent and 5.25 percent, respectively.
The base rate is the interest rate set by the HKMA for lending to other banks, used as the benchmark for computing the discount rates.
Hong Kong’s monetary policy moves in lockstep with the United States’ as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar
It is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBORs), whichever is the higher.
"Following the 75-basis point upward adjustment in the target range for the US federal funds rate on June 15 (US time), 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 2.00 percent, while the average of the five-day moving averages of the overnight and one-month HIBORs is 0.20 percent, according to the HKMA statement. "The base rate is therefore set at 2.00 percent according to the pre-set formula."
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Hong Kong’s monetary policy moves in lockstep with the United States’ as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.
The Fed raised its target interest rate by three-quarters of a percentage point, the most by the US central bank since 1994, as it seeks to tame red-hot inflation.
With Reuters' inputs