The Hong Kong Monetary Authority on Thursday kept its base rate unchanged at 4.75 percent in lockstep with the US Federal Reserve, which held the target range for the federal funds rate steady at 4.25-4.5 percent.

On Wednesday, the Federal Open Market Committee of the Fed announced it had decided to keep the target range for the federal funds rate unchanged after its two-day meeting.

The HKMA said in a statement that while the Fed’s decision was in line with market expectations, the market generally considered that the pace of future rate cuts remains uncertain.

It depended on “US inflation and labor market data developments, as well as the impact of tariff measures and fiscal policy on US economic activities, which remains to be observed”, the HKMA pointed out.

Stressing that the monetary and financial markets in Hong Kong have continued to operate in an orderly manner, the HKMA said that the prevailing interest rate environment in the city may also evolve due to various factors.  

Since late June, the weak-side convertibility undertaking has been triggered several times. The HKMA had intervened five times to prevent the city’s currency from weakening beyond its official trading band.

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Under the Linked Exchange Rate System, the Hong Kong dollar exchange rate must stay within a narrow band of HK$7.75 ($0.99) to HK$7.85 per US dollar.

“The current Hong Kong dollar-US dollar interest rate differential continues to incentivize carry trades to sell Hong Kong dollars for US dollars, keeping the Hong Kong dollar trading near the 7.85 weak-side convertibility undertakings level,” the HKMA said.

It was possible that the weak-side convertibility undertakings will be triggered again, depending on Hong Kong dollar supply-demand dynamics, as well as other uncertain factors such as US monetary policy and interest rate trajectories, global financial markets and fund flows, according to the HKMA.

The HKMA said in such a case it would buy Hong Kong dollars and sell US dollars in accordance with the LERS.

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The HKMA reminded the public of the possibility of an increase in Hong Kong dollar interest rates, and to properly manage the associated risks when making decisions about property purchase, investment or borrowing.