FX.co ★ Hong Kong Cuts Base Rate to 4.5% After Fed Move

The Hong Kong Monetary Authority (HKMA) lowered its base rate by 25 basis points to 4.5% on September 18. This decision followed the US Federal Reserve's initial rate cut since December 2024 and its indication of potential further easing by the end of the year. As the Hong Kong dollar is pegged to the US dollar, the HKMA aligns its policies with those of the Fed. Recent fluctuations in the local currency have already necessitated interventions to maintain the stability of the peg through dollar sales. This rate reduction occurs amidst a complex economic situation for Hong Kong. While the government has cautioned that uncertainties surrounding trade policy could impact investment and cross-border commerce, the economy showed a 3.1% growth year-on-year in the first quarter of 2025, bolstered by tourism and exports. Despite these positive indicators, the HKMA advised households and businesses to exercise prudence concerning property, investment, and borrowing decisions due to the potential for further interest rate fluctuations as global monetary conditions continue to shift.