Base Rate Lowered To 0.86%

The Monetary Authority today lowered the base rate to 0.86% with immediate effect.

The decrease was made according to a pre-set formula.

The base rate is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates, whichever is the higher.

Following the 100-basis point downward shift in the target range for the US federal funds rate on March 15, 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 0.5%, while the average of the five-day moving averages of the overnight and one-month HIBORs is 0.86%. 

The Base Rate is therefore set at 0.86%.

Monetary Authority Chief Executive Eddie Yue noted that following its rate cut on March 3, the United States Federal Reserve further reduced the interest rate outside its scheduled meetings and announced a series of measures last night, including increasing its debt securities holdings to support market operations and encourage banks to provide credit to mitigate risks posed by the coronavirus to the US economy.

“Following the US rate cut on March 3, global central banks and fiscal authorities have lowered interest rates and rolled out other measures. These actions together with the Fed's latest decisions show that they are proactive in using various policy tools to mitigate the relevant risks.

“The spread of the coronavirus has caused big adjustments in global financial markets. Likewise, Hong Kong's stock market has also seen huge volatilities,” Mr Yue said.

He added that local markets have continued to operate in an orderly manner.

“Hong Kong dollar exchange and interest rates have been largely stable, and our banking system remained robust with strong capital and liquidity buffers.

“On interest rates, Hong Kong interbank rates would likely follow the downward trend of their US counterparts, but the actual adjustment would still depend on factors such as funding demand and supply, and different tenors of interbank rates may also see different degree of adjustments.

“The retail deposit and lending rates would however be subject to commercial considerations of individual banks.”

Mr Yue also said the authority will continue to remain vigilant and closely monitor the markets in collaboration with other regulators, amid the challenging environment being faced by global financial markets.

“We will also maintain currency stability in Hong Kong in accordance with the Linked Exchange Rate System.

“As the markets will continue to go through significant ups and downs, I would like to remind investors to assess and manage risks carefully before taking any investment decision."