Hong Kong Monetary Authority maintains benchmark interest rate unchanged at 4%

1、 Synchronize decision-making with the Federal Reserve, in line with market expectations

The Hong Kong Monetary Authority has kept the benchmark interest rate at 4% unchanged this time, which is completely in line with the market's previous general expectation. The core reason is the linkage between the Hong Kong dollar and the US dollar. Previously, the Federal Reserve ended a new round of interest rate meetings and announced that it would maintain the target range of the federal funds rate at 3.5% -3.75% unchanged. This is a continuation of its recent consecutive inaction, mainly considering factors such as the uncertainty of global economic recovery, periodic fluctuations in inflation levels, and geopolitical risks.

As a currency system pegged to the US dollar, the interest rate adjustment of the Hong Kong dollar has always been synchronized with the Federal Reserve. According to the interest rate pricing rules of the Hong Kong Monetary Authority, the benchmark interest rate in Hong Kong is directly linked to the US federal funds rate, ensuring that the interest rate spread between the Hong Kong dollar and the US dollar is within a reasonable range, and avoiding large-scale capital flows caused by excessive interest rate spreads, which could impact the stability of the Hong Kong dollar exchange rate. Maintaining the benchmark interest rate of 4% this time is not only a precise response to the Federal Reserve's policies, but also a necessary measure to maintain the order of the Hong Kong money market.

2、 The core of the joint exchange rate system is to build a solid foundation for currency stability

The interest rate decision of the Hong Kong Monetary Authority is essentially a concrete manifestation of the Hong Kong dollar linked exchange rate system. Since its implementation in 1983, this system has always been the "ballast stone" for Hong Kong's financial stability. Its core logic is to link the Hong Kong dollar to the US dollar, with the exchange rate fixed at the benchmark level of 7.8 Hong Kong dollars to 1 US dollar, allowing for a narrow range of fluctuations between 7.75 and 7.85 Hong Kong dollars.

Under the linked exchange rate system, Hong Kong has lost its independent monetary policy autonomy, and interest rates must be adjusted according to the Federal Reserve, which is a prerequisite for ensuring the stability of the Hong Kong dollar exchange rate and the free flow of capital. When the Federal Reserve adjusts interest rates, the Hong Kong Monetary Authority follows suit, effectively balancing the interest rate differential between the Hong Kong dollar and the US dollar, preventing large-scale capital outflows or inflows, and maintaining Hong Kong's reputation and attractiveness as an international financial center. The maintenance of unchanged interest rates this time is a vivid practice of "policy synchronicity" under the linked exchange rate system, demonstrating the resilience of this system in dealing with global financial fluctuations.

3、 Multidimensional impact is evident, with parallel efforts to stabilize finance and control risks

Maintaining the 4% benchmark interest rate unchanged has had multidimensional impacts on Hong Kong's financial market, real estate market, and real economy, with a focus on overall stability while also considering risk prevention and control.

At the financial market level, a stable interest rate environment effectively alleviates market volatility, the Hong Kong dollar exchange rate continues to operate smoothly within a reasonable range, and the liquidity of the banking system remains abundant, reducing the impact of international capital flows. For the Hong Kong stock and bond markets, stable interest rates help reduce fluctuations in financing costs, enhance the confidence of international investors, and provide support for the smooth operation of the market.

At the level of the real estate market, the benchmark interest rate of 4% remains high, which means that the mortgage loan interest rates of Hong Kong banks will remain stable. In the short term, the cost of buying a house is still at a high level, which to some extent suppresses speculative demand and continues the moderate adjustment trend of the real estate market. But thanks to the scarcity of land in Hong Kong and the strong demand in core areas, the risk of a significant downturn in the real estate market is controllable, and stable interest rates have also avoided drastic market fluctuations.