Hong Kong keeps rate steady for seventh time as traders shift hope of cuts to later this year

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The city’s base rate remains at 5.75 per cent after the US Fed kept its target rate unchanged

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A pedestrian walks past a billboard displaying various currency notes outside a foreign exchange shop in Sheung Wan on 21 October 2022. Photo: Yik Yeung -man.

Enoch Yiu

Published: 7:01am, 13 Jun 2024Updated: 12:46pm, 17 Jun 2024

Corrected [10:32am, 13 Jun, 2024]

[10:32am, 13 Jun, 2024]
Corrects commencement date of rate increase to 2023 in 11th paragraph

Hong Kong’s de facto central bank kept its base rate unchanged for the seventh time – with local lenders following suit – as traders in the financial markets shift their attention to later this year in expectation of the first cut in borrowing costs.

The city’s base rate remains at 5.75 per cent, the Hong Kong Monetary Authority (HKMA) said early on Thursday morning. Hours earlier, the US Federal Reserve said it would keep its target rate in the range of 5.25 per cent to 5.5 per cent in line with expectations, pencilling in one cut this year.

The city’s six major lenders, including note-issuing banks HSBC, Standard Chartered and Bank of China (Hong Kong), all followed the HKMA and kept their key lending and deposit rates unchanged, which means mortgage borrowers and companies face a longer wait for relief from high borrowing costs.

“The most recent inflation readings have been more favourable than earlier in the year, and there has been modest further progress toward our inflation objective,” Fed Chairman Jerome Powell said after a two-day meeting. “We’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2 per cent.”

The Fed’s policymakers signalled just one rate cut this year, pencilling in four reductions in 2025. That did little to douse the fervour in the stock market, as the S&P500 index surged past 5,400 points for the first time. The benchmark ended the day at 5,421.03, a gain of 0.85 per cent.

US Federal Reserve chairman Jerome Powell spoke after the central bank’s two-day policy meeting in Washington, US, on May 1, 2024. Photo: Reuters

“The Fed could still move two times this year if inflation figures continue to soften,” Kerry Craig, global market strategist at JP Morgan Asset Management, said in a research note after the Fed decision. “The markets should take away the impression of a central bank that is still on a policy easing path, even if it is coming later.”