2023.03.2307:57:00UTC+00Hong Kong Central Bank Hikes Base Rate By 25 Bps

The Hong Kong Monetary Authority lifted its benchmark rate by 25 basis points on Thursday, following the policy announcement of the U.S. Federal Reserve a day earlier.

The HKMA adjusted the Base Rate upward to 5.25 percent from 5.00 percent with immediate effect.

The Federal Reserve raised its interest rate by 25 basis points on Wednesday and signaled that the tightening cycle is nearing an end. The bank is expected to lift the rate just one more time this year.

The HKMA said more time is required to assess the impact of past rate hikes on the US economy and inflation.

Individual banks in the US had exhibited financial health and liquidity problems recently, which might result in credit tightening, the HKMA noted.

The bank said it is too soon to assess how much this will further affect economic activities and influence monetary policy.

Hong Kong's Base Rate is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates, whichever is higher.

Following the 25-basis point upward adjustment in the target range for the US federal funds rate, 50 basis points above the lower end of the prevailing target range for the US federal funds rate was 5.25 percent, while the average of the five-day moving averages of the overnight and one-month HIBORs was 2.61 percent.

Accordingly, the pre-set formula fixed the Base Rate at 5.25 percent.