Education



The Hong Kong Monetary Authority is Hong Kong’s central bank.

raised the base rate by 50 basis points to 1.25 percent on Thursday

Background to the move from the HKMA:

The base rate is the interest rate forming the foundation upon which the Discount Rates for repurchase-agreement transactions through the Discount Window are computed

The Base Rate is currently set at 50 basis points above the prevailing US Fed Funds Target Rate or the average of the five-day moving averages of the overnight and one-month HIBORs, whichever is the higher.

Thus, with the Fed jacking up its FF target rate overnight, the HKMA have done the same with the base rate

Now at 1.25% (from 0.75%)

The HKMA announces the Base Rate every day before the interbank market opens in Hong Kong

The HKD is linked (‘pegged’ in a band) to the US dollar so changes from the Fed impact on the HKMA and HKD. In the long-term chart below you can see the band in operation (7.75 to 7.85 if you can’t tell ….):



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