On Friday, Hong Kong's de facto central bank implemented a policy base rate reduction of 0.25%, bringing it down to 5.00%. This decision aligns with the U.S. Federal Reserve’s recent choice to cut its key rate by the same percentage. Unlike many other central banks, the Hong Kong Monetary Authority (HKMA) focuses on maintaining the stability of the Hong Kong dollar's exchange rate rather than targeting inflation rates.
Following the 1997 handover from the UK to China, Hong Kong preserved its own currency and monetary governance. Currently, the HKMA pegs the Hong Kong dollar against the U.S. dollar within a band of 7.75 to 7.85. In a statement released with the rate reduction announcement, the HKMA affirmed, "Our financial and monetary markets have continued to operate in a smooth and orderly manner.
Market liquidity condition has remained stable, and the Hong Kong dollar exchange rate stays steady." Looking ahead, the HKMA cautioned that interest rates may decline gradually. The bank noted, "The rate-cut cycle in the U.S. is still at its initial stage. Interest rates might still remain at relatively high levels for some time.
The public should carefully assess and continue to manage the interest rate risk when making property purchases, mortgage, or other borrowing decisions." According to the mid-August government forecast, Hong Kong's gross domestic product is anticipated to grow by between 2.5% and 3.5% year-on-year in 2024..