MNI BRIEF: HKMA Tracks Fed, Lifts Base Rate 75bp
Hong Kong’s base interest rate was increased 75bp to 4.25% on Thursday, according to the Hong Kong Monetary Authority (HKMA).
The sixth hike this year follows the Federal Reserve's decision to lift U.S. interest rates by the same amount. (SEE MNI FED WATCH: Powell Nods To Slower Hikes, Higher Rate Peak - Bonds & Currency News | Market News). The HKMA mirrors U.S. monetary policy moves to maintain its Linked Exchange Rate System that pegs the Hong Kong dollar to the U.S. dollar.
The monetary tightening further dampens Hong Kong’s economic outlook, with Q3 GDP data released this week showing a contraction of 4.5%. (SEE MNI BRIEF: Hong Kong's Q3 GDP Slumps 4.5% As Exports Decline)
HKMA chief executive Eddie Yue this week defended the Hong Kong dollar's peg with the U.S. dollar. The peg “provides the needed exchange rate stability in uncertain times, but of course with monetary policy there will be trade off,” he told CNBC on Nov 1.
Chief Executive of Hong Kong SAR John Lee said on Nov 2 that he believed the continued lifting of Covid restrictions would help boost the economy. (SEE MNI BRIEF: HK To Continue Lifting Covid Restrictions)