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Enoch Yiu

Hong Kong’s monetary authority warned of interest-rate uncertainty amid ongoing tensions in the Middle East, after leaving its base rate unchanged on Thursday in tandem with the US Federal Reserve.
The Hong Kong Monetary Authority (HKMA) said US interest-rate movements were affected by the Middle East tensions, which had led to higher oil prices and affected US inflation.
Analysts said the inflationary impact of the US-Israel war with Iran had reduced the chances of a rate cut this year.
“The future trend of US interest rates is quite uncertain, which may influence the interest-rate environment in Hong Kong,” the HKMA said in a statement. “The public should carefully manage interest-rate risks when making decisions about property purchase, investment or borrowing.”
The city’s three note-issuing banks – HSBC, Standard Chartered and Bank of China (Hong Kong) – announced that they would keep their prime and savings rates unchanged.
The city’s base rate was kept at 4 per cent, hours after the Fed kept its target rate in the range of 3.5 to 3.75 per cent following the third meeting of the Federal Open Market Committee (FOMC) this year.
“We’re going to have to wait and see,” Fed chairman Jerome Powell said in a media briefing after he hosted his last Federal Open Market Committee (FOMC) meeting before his term ends on May 15.
He noted that while policymakers were not ⁠ready to signal the possibility of rate hikes at this week’s meeting, the centre was moving “towards a more neutral place” where an increase in borrowing costs would be given equal weight in policy guidance to a cut.


The Fed’s decision was widely expected, with 100 per cent of traders forecasting no change, according to CME FedWatch data based on Fed funds futures contracts on Wednesday.
Jean Boivin, head of BlackRock Investment Institute, said the case for further Fed rate cuts had become harder.
“Powell said caution is needed when it comes to assessing the impact of higher energy prices on inflation – partly because inflation has already been above target due to the impact of tariffs,” Boivin said. “We think this assessment sets the Fed up for an upside surprise on inflation if solid wage gains continue to push core services inflation.”
Powell confirmed he would remain on the Fed’s board but pledged to keep a low profile and support the incoming chair, Kevin Warsh.
“Attention is now turning to his successor, Kevin Warsh, whose emphasis on price stability and a more orthodox interpretation of the Fed’s mandate has reinforced expectations that monetary policy will remain firmly focused on inflation even as growth moderates,” said Jacky Lam, senior vice-president at Charles Schwab Hong Kong.
“Markets have responded by pushing back expectations for the first rate cut, with some investors now pricing in no reductions at all this year.”
This was the second FOMC meeting since the February 28 outbreak of the war, which drove up oil prices and sparked inflation fears.
“The lagged impact of oil shock on profit margin or consumer durables typically takes two to three quarters,” said Ryan Lam Chun-wang, Hong Kong head of research at Shanghai Commercial Bank. “The Fed does not want to rock the boat, and the bar for further rate movement is high this year.”
The US inflation rate rose sharply to 3.3 per cent in March, the highest since May 2024, up from 2.4 per cent in February, driven mainly by rising energy costs. This was far from the Fed’s 2 per cent inflation target.
Under the Linked Exchange Rate System introduced in 1983, the Hong Kong dollar is pegged to the US dollar, so the HKMA always keeps its base rate in line with FOMC decisions. However, local commercial banks can decide when and by how much to cut their prime and savings rates.
Analysts said local lenders were not likely to cut their prime rates further. Because the savings rate has been close to zero since the last rate cut in October, cutting prime rates further would affect the banks’ net interest-rate margins and hence their profitability.
HSBC and its subsidiary Hang Seng Bank, as well as Bank of China (Hong Kong), have their prime rate at 5 per cent, while Standard Chartered and most other major lenders have theirs set at 5.25 per cent. All the banks have their savings rate at 0.001 per cent. Only customers with deposits above HK$5,000 earn interest, while those with less earn no interest.
⁠“⁠Although Hong Kong banks have no room to cut the prime rate, banks can increase the prime-minus spread to make effective lending rates lower,” said Tommy Ong, the managing director of T.O. & Associates Consultancy.
“⁠The Hong Kong stock market will see better support with oil prices coming down and ample liquidity. The Middle East tensions have increased the attractiveness of the Hong Kong property market to global investors due to its relative stability and inflation-hedging properties. The recovery of home prices will continue.”


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HSBC, Standard Chartered and Bank of China (Hong Kong) keep their prime and savings rates unchanged


HSBC, Standard Chartered and Bank of China (Hong Kong) keep their prime and savings rates unchanged.


HKMA warns of interest-rate uncertainty as Fed’s trajectory remains unclear

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}HSBC, Standard Chartered and Bank of China (Hong Kong) keep their prime and savings rates unchanged

HSBC, Standard Chartered and Bank of China (Hong Kong) keep their prime and savings rates unchanged