The HKMA Announced a 50 Basis Point Cut to the Base Rate, Reducing It to 5.25%

After the Federal Reserve announced a 50-basis-point interest rate cut, the Hong Kong Monetary Authority (HKMA) promptly followed suit. On September 19, the HKMA announced a 50-basis-point cut to its base rate, bringing it down to 5.25%, effective immediately. Paul Chan Mo-po, Financial Secretary of the HKSAR, stated that the rate cuts in both the U.S. and Hong Kong would benefit the operation of Hong Kong businesses and have a positive impact on the asset market. Howard Lee, Deputy Chief Executive of the HKMA, remarked that the rate cut was in line with expectations, but noted that despite the Federal Reserve beginning to cut rates, interest rates are expected to remain high in the foreseeable future. A report by China International Capital Corporation (CICC) suggested that this rate cut by the Federal Reserve could be beneficial to the performance of the Chinese Mainland assets to some extent. What is more, a UBS report indicated that Hong Kong’s lower interest rate environment would be more favorable to market fundamentals, reducing the debt burden on households and non-financial corporations, thereby injecting growth momentum into the overall economy. The rate cut is expected to drive capital inflows into Hong Kong's risk assets, triggering a revaluation of their value.