Hong Kong’s central bank raises interest rates by 0.75% to follow Fed’s lead

The Hong Kong Monetary Authority (HKMA) raised its key interest rate by 0.75% to 4.25%, the highest level in 14 years and the sixth rate hike in eight months.

The HKMA raised interest rates after the Federal Reserve raised the short-term interest rate by 0.75% to 3.75-4.00% at its meeting yesterday. This is the highest level since January 2008 and the fourth consecutive 0.75% rate hike.

In the past, the HKMA has pursued a monetary policy comparable to that of the Fed. This is because the Hong Kong dollar is pegged to the U.S. dollar in a relatively narrow range of $7.75-7.85.

The HKMA’s chief executive will make a statement on the rate hike this morning. The HKMA is trying to convince international financial investors that Hong Kong will return to normalcy after taking strict measures to contain the spread of COVID-19 for the past three years.

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