Rate cut on the table as Fed inflation worries ease

June Chen

Hong Kong's major banks are keeping their prime rates unchanged, following the lead of the US Federal Reserve, while the Hong Kong Monetary Authority highlighted the unclear rate cut path ahead.

Hong Kong and Shanghai Banking Corporation announced that its best lending rate in Hong Kong remains unchanged at 5.875 percent. The last time HSBC raised its best lending rate was in July, up by 12.5 basis points.

Hang Seng Bank, part of HSBC Group, retains its Hong Kong dollar best lending rate at 5.875 percent with an unchanged savings deposit rate.

Standard Chartered Bank (Hong Kong) Limited announced its Hong Kong dollar best lending rate remains unchanged at 6.125 percent per annum.

There will also be no change in rates for Hong Kong dollar savings accounts.

Bank of China (Hong Kong) said its Hong Kong dollar prime rate and savings deposit rate remain unchanged at 5.875 percent and 0.875 percent per annum ,respectively.

The Federal Open Market Committee of the Federal Reserve announced yesterday after a two-day meeting that it had decided to keep the target range for the federal funds rate unchanged at 5.25 to 5.5 percent.

In terms of the interest-rate cut plan, "the question will be whether the totality of the data, the evolving outlook, and the balance of risks are consistent with rising confidence on inflation and maintaining a solid labor market," Federal Reserve chair Jerome Powell said. "If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September."

BOC Hong Kong said US employment data are a key to the rate cut path.

The Hong Kong Monetary Authority said that Hong Kong dollar interbank rates will stay relatively high for the time being, while the future rate path remains uncertain.

The Hong Kong interbank offered rate fell across all maturities, with the mortgage-related one-month tenor dropping to 4.43649 percent, the lowest after May 20.

Centaline Mortgage said that if the US cuts interest rates in September, it is more likely that the Hong Kong interbank offered rate will gradually fall, and the best lending and primes rate may fall later. The city's rate cut cycle may start from year-end to the first quarter of next year; by then the prime rate in the financial hub will have a chance to fall to four percent or below.

Hong Kong's monetary policy moves follow the United States as the city's currency has been pegged to the greenback since 1983, in a tight range of HK$7.75-7.85 per US dollar.

Wheelock Properties managing director Ricky Wong Kwong-yiu said that while Hong Kong may not follow the Fed's rate cut immediately, the signal of interest rates reaching the peak is clear, and the chance of following the Fed's move in the future has increased. He predicted that the local property market will continuously recover if the rate cut is implemented.