Hong Kong’s interest rate cut will have a ripple effect on the economy beyond the immediate fiscal benefits for struggling small and medium enterprises (SMEs), with the move set to bolster investor confidence and spending sentiment, industry players have said.
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Five of Hong Kong’s major commercial banks cut their prime rates for the first time in almost five years on Thursday, after the local monetary authority followed the US Federal Reserve in cutting rates.
Bank of China (Hong Kong), HSBC and its Hang Seng Bank unit announced they would trim their prime lending rates by a quarter percentage point to 5.625 per cent, and cut their savings rate by the same amount to 0.625 per cent per annum for deposits that exceed HK$5,000 (US$640).
Standard Chartered and Bank of East Asia also pared the loan rate for their best customers by a quarter point to 5.875 per cent and will reduce their deposit rate to 0.625 per cent, back to the level of November 2022.
The city’s base rate was cut by half a percentage point to 5.25 per cent, according to the Hong Kong Monetary Authority (HKMA), bringing it back to the level in March 2023. 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.
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Financial Secretary Paul Chan Mo-po said the rate cut would be “positive for local businesses” and “supportive to capital markets” as it would lead to the “softening” of the local currency, which could attract tourists and support consumption in the retail and catering industries.
Danny Lau Tat-pong, honorary chairman of the Hong Kong SME Association, said the rate cuts would have far-reaching implications for the economy, exceeding the actual fiscal benefit it generated for the battered SMEs.
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