HKMA issues caution after Fed holds interest rates steady

Federal funds target range remains unchanged at 4.25% to 4.50%.

The Hong Kong Monetary Authority (HKMA) has urged the public to stay vigilant over interest rate risks, following the US Federal Reserve’s decision to keep rates on hold and signal an unclear trajectory for future cuts.

After concluding its two-day policy meeting, the Federal Open Market Committee (FOMC) announced that it would keep the federal funds target range unchanged at 4.25% to 4.50%. The decision was widely anticipated by markets.

Alongside the rate decision, the Fed released its latest “dot plot,” signaling the possibility of a cumulative 50 basis point rate cut before the end of the year. However, the HKMA noted that the outlook for US interest rates remains highly uncertain, as future policy adjustments will depend on key economic data, including US inflation trends, labor market conditions, and the broader impact of fiscal, economic, and trade policies.

Despite the external uncertainties, the HKMA confirmed that Hong Kong’s financial system continues to function smoothly. “In Hong Kong, our financial and monetary markets have continued to operate in a smooth and orderly manner,” it stated.

Under the Linked Exchange Rate System, Hong Kong dollar interbank rates generally move in tandem with their US dollar counterparts. Shorter-term rates, however, may fluctuate based on local market factors such as seasonal demand and capital market activity.

Looking ahead, the HKMA cautioned that local interest rates are likely to stay at elevated levels for some time.

Given the uncertain path of future US rate cuts, the authority advised the public to exercise prudence when making property purchases, taking out mortgages, or securing other forms of borrowing.