HONG KONG :The Hong Kong Monetary Authority (HKMA) raised on Thursday its base rate charged through the overnight discount window by 75 basis points to 2 per cent, hours after the U.S. Federal Reserve delivered a rate hike of the same margin.
However, major domestic banks including HSBC and Standard Chartered decided to leave their best lending rates in Hong Kong unchanged.
Hong Kong's monetary policy moves in lock-step with the United States' as the city's currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.
The Fed raised its target interest rate by three-quarters of a percentage point, the most by the U.S. central bank since 1994, as it seeks to tame red-hot inflation.
"Hong Kong's monetary and financial markets continue to remain stable despite the U.S.'s multiple rate hikes, with the foreign exchange market operating in an orderly manner and market liquidity being ample," HKMA Chief Executive Eddie Yue told reporters.
Yue said the wide differential between interest rates in the United States and Hong Kong would lead to funds flowing from Hong Kong dollars to U.S. dollars, though Hong Kong dollar interbank rates would eventually catch up with their U.S. dollar counterparts.
One month Hibor - the Hong Kong Interbank Offered Rate, a benchmark used for pricing mortgages - rose to 0.584 per cent on Thursday, its highest in two years, but still well below one-month dollar Libor [USD1MFSR=X] at 1.509 per cent.
Yue urged the public to "carefully assess and manage the relevant risks" when making property purchases and mortgage decisions.