The Hong Kong Monetary Authority is Hong Kong's central bank.
- raised the base rate by 50 basis points to 1.25 percent on Thursday
Background to the move from the HKMA:
- The base rate is the interest rate forming the foundation upon which the Discount Rates for repurchase-agreement transactions through the Discount Window are computed
- The Base Rate is currently set at 50 basis points above the prevailing US Fed Funds Target Rate or the average of the five-day moving averages of the overnight and one-month HIBORs, whichever is the higher.
- Thus, with the Fed jacking up its FF target rate overnight, the HKMA have done the same with the base rate
- Now at 1.25% (from 0.75%)
- The HKMA announces the Base Rate every day before the interbank market opens in Hong Kong
The HKD is linked ('pegged' in a band) to the US dollar so changes from the Fed impact on the HKMA and HKD. In the long-term chart below you can see the band in operation (7.75 to 7.85 if you can't tell ....):
