This undated photo shows the building of the Hong Kong Monetary Authority. (PHOTO / IC)
HONG KONG – The Hong Kong Monetary Authority on Thursday raised its base rate charged through the overnight discount window by 75 basis points to 3.5 percent, hours after the US Federal Reserve delivered a rate hike of the same margin.
Hong Kong's monetary policy moves in lock-step 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.
Hong Kong Financial Secretary Paul Chan said he does not see a sharp risk to the city's real estate market nor a need to adjust property control measures, even as the financial hub braces for more interest rate hikes
HKMA's move prompted the largest commercial banks operating in the territory to increase their best lending rates.
HSBC was the first bank in Hong Kong to announce it was raising its best lending rate by 12.5 basis points to 5.125 percent from 5.0 percent, effective Sept 23, its first rate hike since September 2018.
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It was followed by Standard Chartered, which raised its best lending rate by the same amount to 5.375 percent, starting Sept 23. Bank of China (Hong Kong) also said it would raise its best lending rate by 12.5 basis points to 5.125 percent starting next Monday.
Speaking after the HKMA's rate hike, the city’s Financial Secretary Paul Chan Mo-po said he does not see a sharp risk to the city's real estate market nor a need to adjust property control measures, even as the financial hub braces for more interest rate hikes.
READ MORE: HK banks maintain best lending rates despite HKMA hike
This general view shows the HSBC headquarters (center, right) building and the Standard Chartered Bank building (center, left) in Hong Kong on Jan 31, 2020. (ANTHONY WALLACE / AFP)
Following the HKMA's announcement, HSBC Holdings said it would raise its best lending rate in Hong Kong by 12.5 basis points to 5.125 percent effective Sept 23
Chan said that while home prices in Hong Kong have dropped close to over 6 percent in the first eight months as rising rates hurt sentiment, the property market depends on many factors including employment and the repayment capability of homeowners.
The HKMA's Chief Executive Eddie Yue Wai-man, meanwhile, warned of increasing risks in the global financial market as central banks are expected to continue tightening monetary policy, coupled with geopolitical tensions, the pandemic, high inflation, and slow global growth.
But he stressed that Hong Kong's monetary and financial systems remain stable amid challenges and that the linked exchange-rate system remains robust.
Hong Kong Monetary Authority Chief Executive Eddie Yue Wai-man said Hong Kong's monetary and financial systems remain stable amid challenges and that the linked exchange-rate system remains robust
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.
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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.
The Fed delivered its third straight rate increase of 75 basis points on Wednesday and signaled borrowing costs would keep rising, underscoring the US central bank's resolve not to let up in its battle to contain inflation.
With Reuters' inputs