The Hong Kong Monetary Authority (HKMA) has followed in the footsteps of the US Federal Reserve by raising its benchmark interest rate by 0.25% to 5.50% on May 4. The decision comes after the Federal Reserve raised its short-term interest rate to 5.00-5.25% on May 3.
Hong Kong’s monetary policy is in line with that of the United States since the Hong Kong dollar is pegged to the US dollar in the range of 7.75-7.85 HK dollars per US dollar. This means that any changes made by the Federal Reserve to its interest rates are usually mirrored by the HKMA.
The Federal Reserve’s decision to raise interest rates comes amid growing concerns over the recent collapse of US banks, the issue of the US debt ceiling, and high inflation. The Fed’s officials have signaled that they may pause in their efforts to raise interest rates to assess the impact of these factors.
The HKMA’s decision to raise interest rates indicates that it is also taking a cautious approach in light of these developments. The move aims to maintain financial stability and balance the risk of inflationary pressures against the need to support economic growth.