Hong Kong's central bank raises base rate 25 basis points after Fed hike

[HONG KONG] The Hong Kong Monetary Authority (HKMA) raised the base rate charged through its overnight discount window by 25 basis points on Thursday to 2.25 per cent.

The move by Hong Kong's de facto central bank followed the US Federal Reserve's decision to raise its target interest rate, in a widely expected move.

Hong Kong tracks US rate moves because its currency is pegged to the US dollar.

The monetary authority sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBORs (Hong Kong Inter-bank Offered Rate).

The HKMA had mopped up a total HK$70.35 billion (S$12 billion) of Hong Kong dollars from the foreign exchange market since April 12, after the local dollar repeatedly hit the weaker end of its trading range at 7.85 per US dollar, nudging up a key lending rate that could push borrowing costs higher.

REUTERS