23rd March 2023 – (Hong Kong) The Hong Kong Monetary Authority announced this morning that the Base Rate has been set at 5.25 per cent, effective immediately. The Base Rate is used to calculate Discount Rates for repurchase transactions through the Discount Window. It is currently determined by either 50 basis points above the lower end of the prevailing target range for the U.S. federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBORs), whichever is higher. Following a 25-basis point increase in the U.S. federal funds rate target range on 22nd March, the 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 5.25 per cent, while the average of the five-day moving averages of the overnight and one-month HIBORs is 2.61 per cent. Therefore, the Base Rate is set at 5.25 per cent as per the pre-set formula.
The Federal Reserve has raised its key interest rate by a quarter-point in its yearlong fight against high inflation despite concerns that higher borrowing rates could worsen the turmoil that has gripped the banking system. The U.S. central bank has signalled that it is nearing the end of its aggressive series of rate hikes and removed language that had previously indicated that it would keep raising rates at upcoming meetings. However, the Fed included some language that indicated that its efforts to control inflation remain far from complete.
Speaking at a news conference, Fed Chair Jerome H. Powell said that the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy. The latest rate hike, the ninth since last March, suggests that Powell is confident the Fed can manage a dual challenge: Cool still-high inflation through higher loan rates while defusing the turmoil in the banking sector through emergency lending programs and the Biden administration’s decision to cover uninsured deposits at the two failed US banks.
