Hong Kong’s banks raise prime rate to 15-year highs as HKMA warns borrowers to gird against risks in era of higher funding costs

The Hong Kong Monetary Authority (HKMA) raised the city’s base rate by 50 basis points to 4.75 per cent, close to the 5 per cent record last seen in January 2008. Hours earlier, the Fed raised its target rate by the same quantum to between 4.25 per cent and 4.5 per cent, in line with market expectations.

The latest move ended the Fed’s four successive 75-basis point hikes, after US data showed that consumer prices rose at a slower pace in November, underscoring how tight monetary policy was beginning to rein in runaway inflation. Still, the US is not done with jacking up the cost of money, as inflation is hovering at 7 per cent, high above the Fed’s 2-per cent target, which means “the US terminal rate might continue to rise,” said the HKMA’s chief executive Eddie Yue Wai-man.

“The public should be prepared for [higher] rates,” as Hong Kong’s monetary policy follows the Fed’s moves to maintain the city’s currency peg with the US dollar, Yue said after raising Hong Kong’s rate for the seventh time this year. They should “carefully assess and manage the relevant risks when making property purchase, taking out mortgage or making other borrowing decisions,” he said.