Hong Kong Dollar Interest Rates Weaken as US Rate Hike Expected to be the Last of the Cycle
Former Federal Reserve chairman, Ben Bernanke, predicted that the recent rate hike in the United States would likely be the final one of this cycle. Data from the Hong Kong Association of Banks revealed that the Hong Kong dollar interest rates weakened today after three consecutive days of increase. The only exception was the one-year interest rate, which continued to rise to 5.29446%. In contrast, the overnight interest rate experienced a decrease for the first time in five days, dropping by nearly 12 basis points to 4.91179%.
The one-month interest rate, which is closely related to mortgages, also experienced a decline today after four consecutive rises, and settled at 5.19143%. The interest rate gap between the Hong Kong dollar and the US dollar LIBOR over the same period slightly widened to 19 basis points. Similarly, the two-month interest rate stood at 5.19071%. The three-month interest rate, which reflects the cost of bank funds, fell from a nearly seven-month high to 5.19798%, with the spread between the US dollar LIBOR and the same period widening to 40 basis points. The six-month lending rate also experienced a decline, falling to 5.2375%.
As for the exchange rate, the Hong Kong dollar fluctuated between 7.8131 and 7.8166 this morning before settling at 7.8144, which represents a decline of approximately 0.01% from the previous closing price.
During a seminar, Bernanke, who is now working as a senior adviser to Pacific Asset Management, agreed with the general market expectation that the Federal Reserve will raise interest rates by 0.25% at its upcoming meeting, and then halt the interest rate hike cycle. He also estimated that the U.S. inflation rate will range between 3% and 3.5% in the next six months, and is expected to drop to around 3% next year. However, it will take some time for it to return to the 2% target.
In conclusion, while the Hong Kong dollar interest rates weakened today, all eyes are now on the upcoming Federal Reserve meeting to see if it will indeed mark the end of the current rate hike cycle.