Hong Kong cuts base rate by half point in lockstep with US Fed’s aggressive bid on economy

Hong Kong’s de facto central bank cut its base interest rate for the first time in four years in lockstep with the US Federal Reserve, kicking off a cycle of reductions that would help businesses and homeowners to reboot.

The city’s base rate was cut by 50 basis points to 5.25 per cent, according to the Hong Kong Monetary Authority (HKMA). Hours earlier, the Fed slashed its target rate by an unexpectedly aggressive half-point to a range of 4.75 per cent to 5 per cent during its fifth Federal Open Market Committee (FOMC) meeting this year.

The Fed’s cut was widely expected, although traders were split about whether the reduction would be by a quarter-point or a half-point, according to data compiled by CME Group, based on Fed fund futures contracts.

“A 50-basis-point cut cannot be discounted given the recent softening in labour market activity and comments by some Fed policymakers to front-load rate cuts”, said Allianz Global Investors’ global CIO of fixed income Michael Krautzberger, in a research note before the cut. “The Fed, like other central bankers, are now focused on economic growth rather than inflation risks and becoming increasingly worried about being behind the curve on policy – cutting rates too late to avert a recession or sharper growth slowdown”.

US Federal Reserve Chairman Jerome Powell during a press conference in Washington DC on September 18, 2024. Photo: Xinhua.

A quarter-point cut was fully priced in and expected by the market, based on the CME Group’s futures contracts, while only a third of traders were looking for a 50-basis-point reduction.

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мир Экономика и Бизнес

ФРС локстеп Федеральная резерва базовый ставка агрессивный предложение фрс экономика пункт де-факто