Despite Hong Kong's central bank cutting its base interest rate by 25 basis points to 4.0%, mirroring the U.S. Federal Reserve's move, major banks in Hong Kong have decided to maintain their lending rates at current levels. This decision comes as a surprise, given the city's currency peg to the U.S. dollar and the potential economic benefits of lower interest rates. The Hong Kong Monetary Authority (HKMA) has now implemented three interest rate cuts this year, following a similar reduction in late October. After the latest cut, HSBC, Bank of China (Hong Kong), and Standard Chartered Bank all announced they would keep their best lending rates at 5%, 5%, and 5.25% respectively, while savings rates remained unchanged. This stance raises questions about the effectiveness of monetary policy in Hong Kong, especially as the HKMA CEO, Eddie Yue, acknowledges the positive impact of interest rate cuts on the economy and housing market. However, the uncertainty surrounding future rate cuts may influence the interest rate environment, prompting Yue to urge the public to carefully manage interest rate risks.
