Hong Kong’s base interest rate drops to 5% after Fed’s quarter-point cut

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Together with the half-percentage-point cut in September, Hong Kong’s key rate has now fallen back to February 2023’s level

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View of Hong Kong from the Hong Kong Monetary Authority (HKMA) headquarters at IFC in Central district on October 9, 2024. Photo: May Tse

Enoch Yiu

Published: 7:31am, 8 Nov 2024Updated: 11:06am, 8 Nov 2024

Hong Kong’s de facto central bank has cut its base interest rate for the second time this year, lowering the cost of funding to help reboot businesses and reduce the burden on mortgage borrowers.

The Hong Kong Monetary Authority (HKMA) cut the city’s base interest rate by a quarter percentage point to 5 per cent. Together with the half-percentage-point cut in September, Hong Kong’s key rate has fallen to a level last seen in February 2023.

Hours earlier, the US Federal Reserve cut its key rate at the same margin and said it would maintain its target rate in a range of 4.5 per cent to 4.75 per cent, following the seventh meeting of the Federal Open Market Committee (FOMC) this year. The rate-cut cycle is expected to last until next year.

“The pace of future rate cuts remains uncertain as it is subject to US economic data, which will be influenced by fiscal, economic and trade policies,” the HKMA said in a statement after the rate cut. “The risk of global financial market volatility should continue to be closely monitored.”

“The rate-cut cycle in the US is still at its initial stage. Interest rates might still remain at relatively high levels for some time,” the HKMA said, while reiterating calls for the public to beware of interest-rate risks when buying property or taking out loans.

The Fed’s decision was widely expected, with 97.5 per cent of traders anticipating the 25-basis-point reduction that the Fed delivered, while the rest expected no change, according to data compiled by CME Group, based on Fed fund futures contracts on Tuesday.