Hong Kong banks leave rates unchanged as HKMA warns of uncertaintiesThe Hong Kong Monetary Authority (HKMA) warned of considerable uncertainty over the path of US interest rates as it kept its base rate unchanged at 4.25 per cent on Thursday, hours after the US Federal Reserve also held its benchmark rate steady.Hong Kong’s three note-issuing banks – HSBC, Bank of China (Hong Kong) and Standard Chartered – all followed the HKMA’s lead, keeping their prime rates unchanged.The Hong Kong dollar could continue to weaken due to the gap between Hong Kong and US interest rates, as that would lead carry trade activity, the HKMA said in a statement on Thursday. In carry trades, investors borrow in low-interest currencies to invest in higher-yielding assets, which would push the Hong Kong dollar towards the weak end of its peg at HK$7.85 per US dollar.The local currency traded at HK$7.8447 per US dollar early on Thursday afternoon, weaker by 0.07 per cent from two months ago and weaker by almost 1 per cent from a year ago.“The public should carefully manage interest rate risks when making decisions about property purchase, investment or borrowing,” the statement said.US interest rate adjustments would depend on developments in inflation, the labour market and other economic data, and could influence the interest rate environment in Hong Kong, the HKMA added.The city’s de facto central bank often mirrors steps taken by the US Fed as the Hong Kong’s currency is pegged to the US dollar. In September, it followed the Fed in raising its key interest rate by a quarter of a percentage point – the first such increase since 2023.The US Federal Open Market Committee (FOMC), chaired by Kevin Warsh, voted to hold its target range at 3.75 per cent to 4 per cent on Wednesday local time, a decision widely expected by the market.“For Asia however, a Fed on hold does not mean Asia is on hold,” said Navin Saigal, head of global fixed income for Asia-Pacific at BlackRock.He said regional central banks were facing very different combinations of growth, inflation, currency and external pressures, and that Asian bond markets were increasingly driven by their own economic and policy cycles.HSBC, its subsidiary Hang Seng Bank and Bank of China (Hong Kong) held their prime rates at 5 per cent on Thursday, while Standard Chartered stayed at 5.25 per cent. All the banks also left their savings rates unchanged.Banks use the HKMA’s base rate as a reference, but decide their own prime and savings rates. They also held their rates in September, when the HKMA raised its base rate, and have not changed prime rates since trimming them by 12.5 basis points in October last year.In Washington, Warsh said the Fed’s focus remained on inflation. “It’s our responsibility to get inflation down,” he said in a media briefing after his fourth FOMC meeting as chair.Labour market conditions were positive, he said, but inflation had been running above the Fed’s goal for almost six years.US consumer prices rose 3.7 per cent in September from a year earlier, up from 3.4 per cent in August but below the 4.2 per cent increase recorded in May, according to US government figures.Energy costs were the main driver, with petrol prices up 9.1 per cent from August. Inflation remains far above the Fed’s 2 per cent target.Markets were pricing in a rate rise in December, followed by three more in 2027, as inflation concerns built, said Matthias Scheiber, senior portfolio manager and head of the multi-asset team at Allspring Global Investments, and Rushabh Amin, a portfolio manager on the team.“Rates markets are pricing an increasingly demanding combination of strong growth and sticky inflation,” they said in a statement issued after the Fed’s decision. “That is not our base case.”But the chance of rates falling over the next 12 months has also increased, leaving the expected path open to change if growth disappoints or inflation eases, they added.The Fed’s next FOMC meeting, the last one this year, will be held in early December.https://www.scmp.com/business/banking-finance/article/3372495/hong-kong-holds-base-rate-425-after-us-federal-reserve-decision?pgtype=live (ICE HONG KONG)

Fonte notizia: South China Morning Post