PremiumWith this hike in interest rates, the attention is most likely to Hong Kong banks -- including HSBC Holdings Plc and Standard Chartered Plc -- that have so far this year maintained their best lending rates.
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A day after the United States Federal Reserve increased interest rates by 75 basis points for the second straight month, the Hong Kong Monetary Authority increased its base rate by 75 basis points to 2.75 per cent on 28 July.
With this hike in interest rates, the attention is most likely to Hong Kong banks -- including HSBC Holdings Plc and Standard Chartered Plc -- that have so far this year maintained their best lending rates.
Few economists even expect the banks will lift their rates this year, some by as much as 100 basis points. If it happens, that would be the first time in four years that Hong Kong banks have done so.
Also, experts believe that the rise in interest rates may lead to an increase borrowing costs for companies and individuals at a time when Hong Kong’s Covid restrictions continue to weigh on the economy and hurt employment.
The recent US Federal Reserve hikes this year has also fueled debate about the effectiveness of the linked exchange rate system.
Earlier last week, HKMA Chief Executive Eddie Yue called out “irresponsible" comments about the mechanism in a statement, while Financial Secretary Paul Chan said Hong Kong’s foreign exchange reserves can support the system even amid capital outflows.
The US Federal Reserve' policy makers on Wednesday lifted the target range for the federal funds rate on Wednesday to 2.25% to 2.5%. That takes the cumulative June-July increase to 150 basis points -- the steepest rise since the price-fighting era of Paul Volcker in the early 1980s. Forecasts in mid-June showed officials expected to raise rates to about 3.4% this year and 3.8% in 2023.
With Bloomberg inputs.