Hong Kong holds rate as US Fed signals cuts next year

THE Hong Kong Monetary Authority held its base rate at 5.75 per cent on Thursday (Dec 14) after the US Federal Reserve maintained its own interest rate and gave its clearest signal yet that its aggressive hiking campaign is finished.

Hong Kong’s borrowing costs have surged in the last two years as the Fed aggressively raised rates to fight inflation. The city’s base rate moves in lockstep with the Fed because the local currency is pegged to the greenback.

While Fed chair Jerome Powell said officials are prepared to hike again if price pressures return, he indicated policymakers are now turning their focus to when to cut rates as inflation continues its descent towards their 2 per cent goal.

Quarterly projections showed Fed officials expect to lower rates by 75 basis points next year, a sharper pace of cuts than indicated in September. BLOOMBERG