Hong Kong’s base rate rises by the most in 22 years, ushering in era of faster, bigger increases in borrowing costs even as economy slumps
- The city’s base rate rose to 1.25 per cent after the 50-basis point increase, en route to the 4 per cent expected by the end of 2023
- Hang Seng Index fell 0.4 per cent after rising by as much as 2 per cent, taking its cue from the 3 per cent overnight gain in the S&P500
Hong Kong’s cost of money soared by the most in 22 years as the city’s de facto central bank followed the US Federal Reserve to usher in an era of faster, bigger rate increases, even while the local economy is reeling from a slump.
“The interest rate adjustment will come at a much faster pace than the last cycle,” HKMA’s chief executive Eddie Yue Wai-man said in a media briefing after announcing the monetary policy, warning borrowers to “carefully assess and manage the relevant risks” in borrowing.
The Fed has signalled 10 increments in US interest rates, raising the Fed rate from zero to 2.6 per cent by the end of this year, and to 3.75 per cent by the end of 2023, economists said. That’s a faster pace than the previous cycle, when the Fed rate rose 2.25 percentage points in the four years from 2015 to 2018.
“This is just the beginning of the [rising] interest rate cycle,” said Raymond Yeung, chief economist for the Greater China region at ANZ, the Australian bank. “Many mortgage and loan borrowers have never seen such high rates.”
