FINANCIAL SERVICES | Staff Reporter, Hong Kong

Hong Kong hikes base interest rates by 25 bp to 2.75%

This represents the fourth tightening in 2018.

The Hong Kong Monetary Authority (HKMA) has hiked the city’s base lending rate by 25 basis points to bring the headline rate to 2.75% as the central bank continues to tighten in lockstep with the US Fed, reports South China Morning Post.

The quarter-point increase represents the fourth hike in 2018 as the HKMA mirrors the Fed’s overnight increase in a bid to maintain the local currency peg to the US dollar.

“The banks that relied on interbank funding will feel the heat, and they may increase their best lending rate. This will add to costs for mortgage and other borrowers,” Norman Chan, HKMA chief executive said.

Also read: Bank lending slows to 9.5% in July amidst threats of higher borrowing costs

Most banks, however, have decided to hold steady on their lending rates with HSBC, Hang Seng Bank and Bank of China (Hong Kong) rates holding steady at 5.125% whilst Standard Chartered Bank and DBS will continue at 5.375%.

“The expected interest rate rises next year, together with the US-China trade war and Brexit, will all add risks to an economic downturn and volatile stock and property markets,” added Chan.

The heightened downside risks may compel the Fed to spread out the pace of three planned hikes into 2020. 

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