2nd November 2023 – (Hong Kong) In lockstep with the Federal Reserve, Hong Kong’s de facto central bank, the Hong Kong Monetary Authority (HKMA), maintained its base rate at 5.75% on Thursday. The decision spares local borrowers further pressure as the economy shows signs of fragility.
The Fed abandoned more aggressive tightening after three straight hikes, with Chairman Jerome Powell signalling further moves depending on data. However, Hong Kong’s recovery remains tenuous – the latest figures show GDP barely grew last quarter after contracting previously.
Property prices have sunk to five-year lows on high mortgage costs, and further Fed action remains possible. One lawmaker warned the pause is temporary with rates already at decade highs. Bank funding costs are also up, presaging prime rate rises without Fed action.
Officials hope easing financial conditions lessen the need for hikes. Still, inflation persists globally and the Fed vows further tightening if needed. Looking ahead, stability remains uncertain given economic headwinds and uncertainty around future central bank moves on both sides of the Pacific. Borrowers and markets will hope sustainable recovery takes root.
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