The Hong Kong Monetary Fund today raised its key interest rate by 0.25% to 0.75%, saying it wanted to maintain financial system stability in the face of current market volatility.
The Bank of Hong Kong raised interest rates after the U.S. Federal Reserve (Fed) raised rates by 0.25% at its meeting yesterday. At the same time, it signaled that it will raise interest rates again this year to curb inflation.
In the past, the Bank of Hong Kong has aligned interest rates with the Fed because the Hong Kong dollar is pegged to the U.S. dollar.
The rate hike comes at a time when Hong Kong’s economy is struggling with the COVID-19 pandemic. This has led to the Hong Kong government having to step up its measures to contain the outbreak.
Hong Kong has already reassured investors that the Hong Kong economy is strong enough to withstand interest rate increases and that Hong Kong commercial banks have a strong capital base and liquidity.