Hong Kong’s central bank raises key interest rate by 0.75%, following Fed lead

The Bank of Hong Kong (HKMA) today raised its benchmark interest rate to 2% from 0.75%, the third rate hike this year, as the U.S. Federal Reserve tightens monetary policy to curb inflation.

In the past, the Hong Kong central bank has often adjusted its monetary policy in line with the Fed. This is because the Hong Kong dollar is pegged to the U.S. dollar within a range of HKD 7.75-7.85 per U.S. dollar.

The rate hike has hurt the recovery of Hong Kong’s economy, which is slowly recovering from the effects of the COVID-19 pandemic.

Recently, the Hong Kong government lowered its growth forecast for Hong Kong’s economy to a range of 1% to 2%, while Goldman Sachs forecasts growth of only 0.3% for Hong Kong.

Commercial banks in Hong Kong will decide today whether to raise prime lending rates in line with the HKMA’s interest rate trend. Many banks have left interest rates at the same level. These include HSBC and Standard Chartered Bank.

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