HONG KONG - Hong Kong’s monetary authority cut its base lending rate for the second time this year in lockstep with the US Federal Reserve’s widely expected move overnight, reducing the cost of money just as a slowing local economy teeters on the brink of a technical recession.
The city’s de facto central bank reduced the base lending rate by 25 basis points to 2.25 per cent effective immediately, matching a similar cut by the US Fed. Commercial banks in the city are likely to keep their prime rate unchanged at between 5.125 per cent and 5.375 per cent.
“The interest rate cut will benefit the capital markets and economic activities in Hong Kong, “ Norman Chan Tak-lam, chief executive of the Hong Kong Monetary Authority, said in a media briefing after the rate cut.
“The global economy is on a downward trend as a result of the trade war between China and the US. The local social unrest has hit hard tourism, retail and restaurant businesses. The HKMA and banks will work together with the government to help (small and medium enterprises) cope with the challenging time,” he said, referring to earlier announced measures to ensure businesses have funds to stay afloat.
Banks may not immediately follow the rate cut, he said, adding the current interest rate level remains low, with a typical mortgage rate at around 2 per cent.
Chan also said the US Fed has a mixed view on the future interest rate trend as seven members expect more rate cuts, five expect a rate rise while five unchanged.
For the stock market, the HKMA’s rate cut comes just after Budweiser dusted off the IPO it had shelved weeks earlier in the midst of protests that have threatened the city’s reputation as an international financial centre. At US$4.8 billion, Budweiser’s IPO is half its original size but still the biggest in Hong Kong this year.