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Hong Kong calls a recess on rate hiking spree in lockstep with US Fed, but tamps down on euphoria with a warning of remaining ‘risks’

  • The city’s base rate remains at 5.5 per cent, said the Hong Kong Monetary Authority (HKMA), in lockstep with a similar pause by the US Federal Reserve
  • HSBC, Bank of China (Hong Kong), Hang Seng Bank, Standard Chartered and Bank of East Asia announced they are keeping their loan rates unchanged

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The electronic screen of the Hong Kong Stock Exchange on June 6, 2023. Photo: AP
Enoch Yiu

Hong Kong’s de facto central banker reiterated his warning for borrowers to remain vigilant for “relevant risks” from interest rate movements, even as the monetary authority hit the pause button for the first time after 10 rounds of increases in 15 months.

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“The high interest rate environment in the US may last for some time, and the Fed may hike rates again,” according to the Hong Kong Monetary Authority’s chief executive Eddie Yue Wai-man, which would compel the city to move in lockstep to maintain the local currency’s peg to the US dollar. “The interest rate path in the US will remain uncertain.”

The HKMA paused its rate hikes for the first time since March 2022, keeping the city’s base rate at 5.5 per cent, after the Federal Reserve’s move to stagger potential further increases after 10 consecutive hikes.

HSBC, Bank of China (Hong Kong) and Hang Seng Bank said they would keep their prime lending rates unchanged at 5.75 per cent after HKMA’s announcement, while Standard Chartered and Bank of East Asia kept the cost of their Hong Kong-dollar best lending rate at 6 per cent.
Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue Wai-man, speaks to the press at the HKMA-BIS Joint Conference, at The Rosewood in Tsim Sha Tsui on March 24, 2023. Photo: SCMP / Jonathan Wong
Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue Wai-man, speaks to the press at the HKMA-BIS Joint Conference, at The Rosewood in Tsim Sha Tsui on March 24, 2023. Photo: SCMP / Jonathan Wong

“Banks will consider the structure of their own funding costs and other relevant factors” in determining commercial interest rates, Yue said in a press conference. “As the high interest rate environment may last for some time, the public should be mindful of interest rate movements and relevant risks when purchasing property, taking out mortgages or making other borrowing decisions.”

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