© Bloomberg. View of buildings from Victoria Peak in Hong Kong, China, on Thursday, Jan. 27, 2022. Hong Kong’s economic performance in the fourth quarter may provide little consolation as the city struggles to bring the omicron wave under control, putting pressure on the government to dole out more stimulus for hard-hit sectors like retail. Photographer: Paul Yeung/Bloomberg
(Bloomberg) — The Hong Kong Monetary Authority raised its benchmark interest rate for a third time this year, in line with US Federal Reserve’s tightening move.
The central bank’s base rate was increased by 75 basis points to 2%, it said Thursday. Monetary policy in the financial hub moves in lockstep with the Fed given the Hong Kong dollar’s peg with the US currency.
The rate hikes threaten to disrupt Hong Kong’s recovery just as the economy gradually rebounds from the impact of strict Covid restrictions. The government recently downgraded its annual economic growth forecast to a range of 1-2%, although banks like Goldman Sachs Group Inc (NYSE:). see expansion of just 0.3%.
Read More: Hong Kong’s Rate Hikes to Drive Down Costly Housing Prices
“Business investment may slow down and asset market performance, including the property market could be affected too,” Samuel Tse, an economist at DBS Group (OTC:) Holdings Ltd., said before the rate announcement. Still, DBS expects a broader economic recovery in the second-half of this year.
Local banks will decide later Thursday whether to change their best lending rates in line with the HKMA. So far, banks including HSBC Holdings Plc (LON:) and Standard Chartered (OTC:) Plc have maintained their rates.
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