Hong Kong's base rate has been lowered by three quarters of a percentage point to 3.75% after the US announced a similar cut, the Monetary Authority announced on Wednesday.
Authority Chief Executive Joseph Yam said that local banks will make their own decisions whether to follow the US rate cut, observing that it would be understandable if they did not make the same level of reduction, as the savings rate is already rather low in the city.
The Hong Kong interbank offered rate will be lowered, he went on to reveal, expressing his belief the cuts will benefit the local economy.
Mr Yam observed that as the US and the Mainland are Hong Kong's two major markets, their economic situations will have an impact on the city. Since both are facing high inflation, Hong Kong's inflationary rate will also remain high, he said.
The base rate is currently set at either 150 basis points above the prevailing US federal funds target rate or the average of the five-day moving averages of the overnight and one-month HIBORs, whichever is higher.
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