HKMA keeps base rate at 4% as US market slumps, fears the Fed is losing inflation fight Hong Kong’s monetary authority has maintained its base rate following the US Federal Reserve’s decision to keep its key rate unchanged, but US traders are already betting on a rate rise in September. The city’s base rate was kept at 4 per cent by the Hong Kong Monetary Authority (HKMA) on Thursday. Hours earlier, the US Federal Reserve also retained its target rate in the range of 3.5 per cent to 3.75 per cent, concluding its fifth Federal Open Market Committee (FOMC) meeting this year. “US interest rate adjustments will depend on developments in inflation, [the] labour market and other economic data, and may influence the interest rate environment in Hong Kong,” the HKMA said in a statement on Thursday morning. “The public should carefully manage interest rate risks when making decisions about property purchase, investment or borrowing.” The Hong Kong stock market remained stable at 25,824 at 10.30am, while the US stock market slumped on Wednesday with the Dow Jones down 1,152 points or 2.2 per cent, while the S&P 500 fell 1.5 per cent and the Nasdaq dropped 1.7 per cent. The decline came after the bond market signalled the Federal Reserve could be falling behind on its inflation fight. “For some households, businesses ⁠and market ‌professionals, five years of high inflation have ⁠left a mistaken impression that is hard to shake – that the Fed’s implicit inflation target was somehow above 2 per cent,” Fed chairman Kevin Warsh said in a media briefing after hosting his second FOMC meeting. “Let me reiterate: there is no soft inflation target. There ⁠is no soft implicit target, not on this committee’s watch. There’s only a target, and it’s 2 per cent.” The remark has led to increased expectations from traders of a rate rise at the next FOMC meeting in September, with 63.2 per cent of stockbrokers forecasting a 25 basis point rate rise and 36.8 per cent expecting no change, according to CME FedWatch data, based on Fed funds futures contracts, on Thursday. ⁠“No hike at this moment is slightly positive for Hong Kong’s real estate and stock market,” said Tommy Ong, the managing director of T.O. & Associates Consultancy. “However, the magnitude of the price rise will be limited because the next US inflation readings are very uncertain.” The Fed and the HKMA both reduced their key policy rates by a total of 75 basis points in 2025, following a full percentage-point rate cut in 2024. At the beginning of 2026, analysts believed there would be two to three more rate cuts this year, but the tide has turned to a possible rate increase since the US-Israel war with Iran started on February 28. A nearly 20 per cent jump in oil prices this month following a flare-up of Middle East hostilities could prompt the Fed to reassess its policy setting, despite a soft reading in recent US inflation data. The US inflation rate eased to 3.5 per cent in June, from 4.2 per cent in May, but is still higher than the 2.4 per cent seen in February, driven mainly by rising energy costs. This was far from the Fed’s 2 per cent inflation target. Under the Linked Exchange Rate System introduced in 1983, the Hong Kong dollar is pegged to the US dollar, so the HKMA will always change or hold its base rate in line with the FOMC meeting decisions. However, local commercial banks can decide when and how to cut their prime and savings rates. The lenders will announce their rate decisions on Thursday afternoon. HSBC and its subsidiary Hang Seng Bank, as well as Bank of China (Hong Kong), now set their prime rates at 5 per cent, while Standard Chartered and most other major lenders have it at 5.25 per cent. All have a standard savings rate of 0.001 per cent for customers with deposits above HK$5,000 (US$638). https://www.scmp.com/business/banking-finance/article/3362318/hkma-maintains-base-rate-4-us-fed-keeps-rate-unchanged?pgtype=live (ICE HONG KONG)

Fonte notizia: South China Morning Post