Editorial | US interest rate cut is welcome but many challenges remain for China
China – including Hong Kong – is not out of the woods yet, even with the 50 basis point reduction by America’s central bank
Four years after the United States Federal Reserve last reduced its benchmark interest rate in the face of the Covid-19 pandemic, and more than two years after it began raising it to fight inflation, Wednesday’s cut was keenly anticipated.
The unexpectedly aggressive easing of 50 basis points, or half of 1 per cent, signals the beginning of a rate-cutting cycle, with another reduction before the end of the year not ruled out.
The Fed’s move, targeted at heading off any economic slowdown in the US, will have wide knock-on effects – not least in Hong Kong with its currency peg to the US dollar.
The Hong Kong Monetary Authority, the city’s de facto central bank, immediately cut its base rate in lockstep with the Fed by the same amount to 5.25 per cent.
Commercial banks began to follow by adjusting best lending rates, albeit only by a quarter of 1 per cent. This is good news for businesses and home-loan borrowers amid economic headwinds.
