The Hong Kong Monetary Authority (HKMA) cut its base interest rate by 25 basis points to 4.5% on Thursday, marking its first easing since December and mirroring a reduction by the U.S. Federal Reserve.
Hong Kong’s major banks responded quickly to the move. HSBC reduced its Hong Kong dollar best lending rate by 12.5 basis points to 5.125%, effective September 19, while Bank of China (Hong Kong) also cut its prime rate to 5.125% from 5.25%.
As Hong Kong’s currency is pegged tightly to the US dollar, policy changes by the Fed are closely followed.
Luanne Lim, CEO of HSBC Hong Kong, commented that the adjustments are appropriate given the Fed decision and current local market circumstances. She added that the bank will continue to monitor both the external environment and the local economic outlook, and will take a flexible approach when considering future rate adjustments.
HKMA chief executive Eddie Yue noted that the reduction would positively affect the city’s property market and economy, and that the territory’s financial and monetary markets remain stable and orderly.
The Federal Reserve on Wednesday lowered interest rates by a quarter point, signaling its intention to continue gently reducing borrowing costs through the remainder of the year. Yue indicated that the Federal Reserve might lower rates by an additional 50 basis points before the end of 2025, while cautioning that the timing and magnitude of future U.S. interest rate reductions remain uncertain.
