Hong Kong authority follows Fed to cut base rate
9/10/2008 17:12
The Hong Kong Monetary Authority today followed the United States Federal
Reserve to cut the base rate by 50 basis points, with the actual rate cut
amounting to 150 basis points due to a methodology change alongside.
The base
rate was thereby adjusted downward to 2 percent, with immediate effect.
The
Federal Reserve announced its decision to reduce US federal funds target rate by
50 basis points overnight in a concerted global effort to boost the deeply
troubled financial market.
The base rate in Hong Kong was previously set at
either 150 basis points above the prevailing US Federal Funds Target Rate (
FFTR) or the average of the five-day moving averages of the overnight and
one-month HIBORs, whichever is higher.
With the methodology adjustments
effective from today, one leg of the formula for determining the base rate will
be changed by reducing the spread of 150 basis points above the prevailing FFTR
to 50 basis points, while the other leg remains unchanged.
Joseph Yam, chief
executive of the Hong Kong Monetary Authority, has said the rate cut will help
alleviate tight liquidity and help those who are on mortgages for real property,
although the effect may not be immediate.
Hong Kong banks had been unwilling
to lend amid the recent financial turmoil, leading to high interbank lending
rates and pressure on banks to raise mortgage interest rates.
Xinhua
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