Hong Kong central bank raises interest rate after Fed, warns of borrowing risks

HONG KONG -The Hong Kong Monetary Authority (HKMA) on Thursday raised its base rate charged through the overnight discount window by 75 basis points to 4.25 percent, hours after the U.S. Federal Reserve delivered a rate hike of the same margin.

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.

HKMA said U.S. rate hikes will not affect the financial and monetary stability of Hong Kong, and the city’s financial and money markets will continue to operate in a smooth and orderly manner, while the Linked Exchange Rate System continues to work well.

The city’s de facto central bank said the Hong Kong dollar interbank rates will rise further if the United States continues to hike interest rates.

“The public should be prepared for the commercial interest rates to rise further, and carefully assess and manage the relevant risks when making property purchase, mortgage or other borrowing decisions,” Eddie Yue, chief executive of HKMA, said on Thursday.

The Federal Reserve raised interest rates by three-quarters of a percentage point again on Wednesday and said its battle against inflation will require borrowing costs to rise further.

It signaled, however, it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.