Hong Kong Monetary Authority responds to US Fed rate decision
The US Federal Reserve kept its target range at 3.75-4 per cent, as expected. Hong Kong's monetary and financial markets remain orderly, but the HKMA warns of exchange-rate and interest-rate uncertainties ahead.
The Hong Kong Monetary Authority (HKMA) on Thursday responded to the US Federal Reserve's decision to hold the federal funds rate target range at 3.75-4 per cent, announced in the early hours of 29 October Hong Kong time.
The HKMA noted that the Fed's decision was in line with market expectations. In a statement after its meeting, the Federal Open Market Committee said economic activity was growing strongly and the labour market remained stable. It added that inflation remained elevated, reflecting the committee's concern about the inflation outlook, but that more time might be needed to observe changes in the data.
In Hong Kong, the HKMA said monetary and financial markets were operating in an orderly manner. It pointed out that there remained a significant interest-rate differential between the Hong Kong dollar and the US dollar. Carry-trade activities could cause the Hong Kong dollar to weaken gradually, but the HKMA said there was considerable uncertainty around the direction of the Hong Kong dollar exchange rate and interbank rates. Factors such as market appetite for carry trades, Hong Kong dollar fund supply and demand, capital market activities and other seasonal factors could all affect the situation.
The HKMA said US interest rates were subject to considerable uncertainty, depending on inflation trends, labour market conditions and other economic data. This would also affect Hong Kong's interest-rate environment. The HKMA advised people to consider and manage interest-rate risks carefully when making property, investment or borrowing decisions. It said it would continue to monitor market developments closely to maintain monetary and financial stability.
