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Hong Kong’s Bank Maintains Interest Rates at 5.75% in Alignment with the Fed

In a parallel move to the Federal Reserve (Fed), the Hong Kong Monetary Authority (HKMA) announced its decision to keep its policy interest rate steady at 5.75% on November 2. This decision closely followed the Fed’s resolution to maintain its policy interest rate for the second consecutive time, as unveiled during its meeting on November 1.

The HKMA’s adherence to the Fed’s monetary policy is rooted in the fact that the Hong Kong dollar is pegged to the U.S. dollar at an exchange rate range of 7.75 to 7.85 Hong Kong dollars for every 1 U.S. dollar.

During the Federal Reserve’s meeting on November 1, policymakers opted to retain the policy interest rate in the range of 5.25% to 5.50%. The Fed’s decision marked a pause in its aggressive monetary policy tightening, as it contemplated whether past tightening measures were sufficient to curb inflation.

The HKMA expressed its viewpoint that it was premature to conclude whether the cycle of financial tightening in the United States had come to an end. It indicated that interest rates are likely to remain at elevated levels for the foreseeable future.

“The exchange rate of the Hong Kong dollar remains stable, and interbank lending rates are expected to remain elevated for an extended period,” stated the HKMA. It also noted that the local money market continues to function smoothly and in an organized manner.

The alignment of Hong Kong’s monetary policy with the Federal Reserve underscores the close economic ties between the two regions and the need to maintain stability in Hong Kong’s currency market.

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