The Hong Kong Monetary Authority lowered its base interest rate by 25 basis points to 4 percent with immediate effect on Thursday, tracking a rate cut by the US Federal Reserve.
The move came according to a pre-set formula, shortly after Fed officials delivered a third consecutive interest-rate reduction and the final one for the year.
The HKMA eased the lending rate for the third time this year since a 25 basis point cut on Sept 18. The second one came on Oct 30, when the base rate was adjusted to 4.25 percent. 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.
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On Wednesday, the Federal Open Market Committee voted 9-3 to lower the benchmark federal funds rate by a quarter point to a range of 3.5 percent-3.75 percent. Though the Fed officials maintained their outlook for just one cut in 2026, they signaled greater uncertainty about when rates might be cut again.
“Following the 25-basis point downward adjustment in the target range for the US federal funds rate on 10 December (US time), 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 4.00 percent, while the average of the five-day moving averages of the overnight and one-month HIBORs (Hong Kong Interbank Offered Rates) is 2.39 percent,” the HKMA said in a statement on 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 higher.
