Hong Kong’s central bank raised its key interest rate by 75 basis points to 2.75%, hours after the US central bank raised rates by the same amount.
Hong Kong’s monetary policy moves parallel to that of the US, as the city’s currency is pegged to the dollar.
The chief executive of the Hong Kong Monetary Authority (HKMA) said he expects the overnight and one-month interbank rates, as well as short-term rates, to rise at a much faster pace.
“With funds being withdrawn from the Hong Kong dollar system, the automatic interest rate adjustment mechanism will kick in, driving HK dollar interbank rates to gradually rise in line with US rates,” he noted.
“This will stabilize the Hong Kong dollar within the range of $7.75-7.85,” he added, referring to the narrow range of the city’s peg to the US dollar.
Source: Capital
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