Hong Kong Central Bank Lifts Key Rates

“Instead of going into the property market, (capital flows) could go out and ease the property market, and that could strike consumers’ confidence and I think the economy next year may not perform so well”, said Paul Tang, chief economist at Bank of East Asia in Hong Kong. As Hong Kong’s currency is pegged to the United States dollar, the city’s monetary policy typically moves in line with the Fed.

“The normalization of Hong Kong’s interest rate will begin with the outflow of funds from the Hong Kong dollar trigger by high interest rates of the U.S. dollar”.

A company logo is displayed inside the HSBC headquarters in Hong Kong November 3, 2015.

The rate hike followed the U.S. Federal Reserve’s decision to raise the range of its benchmark federal funds rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent on Wednesday, its first move in almost a decade.

“We have seen a relatively slow economic growth this year, which is to a large extent attributed to the weak performance in our foreign trade”.

Meanwhile, rampant deflationary pressure worldwide, volatilities in the global financial landscape, the growth of regional trade agreements, as well as lingering geopolitical threats and increased terrorist concerns, are the major risks and challenges facing Hong Kong exporters. Data from retail banks, which account for about 90% of the total customers’ deposits in the banking sector, are used in the calculation.It should be noted that the composite interest rate represents only average interest expenses.