Hong Kong banks cut lending rates even as HKMA warns of volatility ahead

Hong Kong banks cut lending rates even as HKMA warns of volatility ahead

Hong Kong’s six biggest lenders lowered their prime lending rates for a third time this year, trimming borrowing costs to the lowest level in more than two years.

HSBC and subsidiary Hang Seng Bank said they would trim their prime rate by 12.5 basis points to 5.25 per cent from Friday, the lowest since August 2022. Bank of China (Hong Kong) said it would cut its rate by the same level from Monday.

Bank of East Asia, Standard Chartered and ICBC Asia, said they would reduce their prime rate by the same margin to 5.5 per cent from Monday.

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The banks also said they would reduce their savings rates by the same margin to 0.25 per cent annually on deposits above HK$5,000 (US$640), while no interest will be paid on deposits below that threshold. Standard Chartered pays 0.25 per cent for deposits above HK$1.

“HSBC has decided to lower its Hong Kong dollar deposit and lending rates following another US rate cut, bringing a cumulative reduction of 62.5 basis points since September,” said Luanne Lim, CEO of HSBC Hong Kong.

“The future path of rates remains highly uncertain going into 2025. We will continue to monitor the external environment and local economic outlook, ready to adjust our rates as needed.”

US Federal Reserve chairman Jerome Powell hinted at fewer rate cuts next year. Photo: AP Photo alt=US Federal Reserve chairman Jerome Powell hinted at fewer rate cuts next year. Photo: AP Photo>

Lim’s concerns were shared by the head of Hong Kong’s de facto central bank, who warned the interest rate environment would remain volatile next year after it cut rates for the third time this year in line with the overnight move by the US Federal Reserve.

“The US next year will continue to cut rates, but the pace and frequency of rate cuts may be less than initially expected,” Eddie Yue Wai-man, the CEO of Hong Kong Monetary Authority (HKMA), said in a briefing on Thursday.

“If the interest rates remain at a relatively high level for some time, the extent and pace of future interest rate cuts would be subject to considerable uncertainty,” he said, adding that the public should carefully assess and manage their borrowings.

The HKMA’s 25 basis points cut took its base rate to 4.75 per cent, the lowest level since December 2022.

Hours earlier, the Fed said it would maintain its target rate in the range of 4.25 to 4.50 per cent. However, optimism with the widely expected cut was punctured by the Fed’s unexpectedly hawkish forecast of only two more reductions in 2025.



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