The Hong Kong Monetary Authority lowered its base interest rate by 25 basis points to 4.25 percent on Thursday, tracking a much-expected rate cut by the US Federal Reserve.

The move came shortly after the Fed cut interest rates by a quarter of a percentage point to lower the policy rate to a range of 3.75 percent-4.00 percent overnight.

The HKMA eased the lending rate for the second time this year since a 25 basis point cut last month. The rate is charged via the overnight discount window.

Hong Kong's monetary policy moves in lock-step with the United States, with the city's currency pegged to the greenback in a tight range of 7.75-7.85 per dollar.

RELATED ARTICLES

• Hong Kong funding cost seen sliding on Fed cuts, slow lending
• Looming US rate cut may boost HK financial markets
• HK overnight rate surges past 5% for first time this year

“Following the 25-basis point downward adjustment in the target range for the US federal funds rate on 29 October (US time), 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 4.25 percent, while the average of the five-day moving averages of the overnight and one-month HIBORs (Hong Kong Interbank Offered Rates) is 3.21 percent,” the HKMA said in a statement Thursday morning.

The base rate is the interest rate forming the foundation upon which the discount rates for repurchase transactions through the discount window are computed.  It is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month HIBORs, whichever is the higher.