Hong Kong’s de facto central bank has cut its base interest rate for the third time in three months, lowering the cost of funding to help reboot businesses and ease the burden of mortgage borrowers.
The city’s base rate was reduced by a quarter of a percentage point to 4 per cent, according to the Hong Kong Monetary Authority (HKMA) on Thursday. Hours earlier, the US Federal Reserve cut its target rate by the same margin to a range of 3.5 per cent to 3.75 per cent, following the final meeting of the Federal Open Market Committee (FOMC) this year.
The current base rate in Hong Kong is the lowest since October 2022. Together with a total of 50 basis points in cuts over the past two months, both Hong Kong and US central banks have lowered their key interest rates by 75 basis points, or three-quarters of a point.
The Fed’s decision was widely expected, with 87.6 per cent of traders forecasting a 25-basis-point cut, while 12.4 per cent predicted no change, according to data from CME FedWatch, which was based on Fed fund futures contracts on Wednesday. The move, in a rarely seen split decision, fell short of the demands for bigger cuts by US President Donald Trump, as three of the FOMC’s 12 members dissented with the rate cut decision.
The Federal Reserve, headed by Jerome Powell, has cut its target rate to a range of 3.5 per cent to 3.75 per cent. Photo: Getty Images
“Inflation has moved up since earlier in the year and remains somewhat elevated,” according to a release by the FOMC. “Uncertainty about the economic outlook remains elevated. The committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.”
The December rate decision comes as Jerome Powell’s term as Federal chair ends in May 2026, after assuming the role as the head of the world’s most powerful central bank in 2018. During his tenure, he cut rates to zero in March 2020 to cope with the Covid-19 pandemic, and then launched a rate-hike cycle in 2022 to control inflation, which peaked at 9.1 per cent.
