The Hong Kong Monetary Authority tightened its monetary policy on Thursday, in tandem with the decision of the US Federal Reserve.
The HKMA adjusted the Base Rate upwards to 5.00 percent from 4.75 percent with immediate effect.
The Federal Reserve had raised the target range for the federal funds rate by 25 basis points to 4.50 to 4.75 percent on Wednesday. The latest hike came after the central bank raised rates by 75 basis points in November and by 50 basis points in December.
Hong Kong’s base rate is set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates, whichever is the higher.
Following the 25-basis point rate hike by the Federal Reserve on Wednesday, 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 5.00 percent, while the average of the five-day moving averages of the overnight and one-month HIBORs is 2.05 percent.
According to the pre-set formula, the Base Rate is therefore set at 5.00 percent.
Official data released on Wednesday showed that the Hong Kong economy contracted again in the fourth quarter due to weak external trade and investment.
Gross domestic product contracted 4.2 percent on a yearly basis in the fourth quarter, but slower than the 4.6 percent fall a quarter ago.
For 2022 as a whole, real GDP shrank 3.5 percent, after a notable growth of 6.4 percent in 2021.
A government spokesman said the Hong Kong economy is set to recover this year, underpinned by an expected faster growth of the Mainland economy and the relaxation of cross-boundary truck movement restrictions.
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