The decision by Hong Kong banks to follow the US Federal Reserve’s interest rate cut will help the city’s economy by easing loan repayments for mortgage holders, the finance chief has said, while revealing that local economic growth was doing “okay”.
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“I welcome the rate cut, as it could lower the pressure on residents and businesspeople paying their mortgages,” Financial Secretary Paul Chan Mo-po told the Post in an interview in Riyadh.
He was referring to the recent move by Hong Kong’s major banks that saw them reduce their prime lending rates in some cases to a historic low of 5 per cent.
Chan spoke ahead of Friday afternoon’s announcement of the city’s gross domestic product figures for the third quarter.
In the interview, the finance chief said authorities had been observing the Federal Reserve, noting that Hong Kong’s interest rates should align with the American rate cuts due to the linked exchange rate system between the Hong Kong and US currencies.
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The Hong Kong Monetary Authority cut the base rate to 4.25 per cent on Thursday morning, hours after the Federal Reserve pared its target rate by the same margin to a range of 3.75 to 4 per cent during the seventh meeting of the Federal Open Market Committee this year.
Chan added that the Federal Reserve’s rate cut provided the city with the conditions to lower the rate.