Hong Kong lowers base rate to 2%, tracking US Federal Reserve move
10-OCT-2008 Intellasia | Bloomberg
Oct 10, 2008 - 7:00:00 AM
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| An official (left) from Hong Kong's Bank of East Asia hands out a statement to customers on September 24 as concerns grew of a run on the baking group. A second Hong Kong man has been arrested for spreading internet rumours that the lender would be shut down, police have said.
(AFP/File/Mike Clarke) |
The Hong Kong Monetary Authority cut its base rate to 2% to help boost bank lending, tracking yesterday's move by the US Federal Reserve.
HKMA Chief Executive Joseph Yam announced the rate cut to reporters in Hong Kong today. Hong Kong's monetary policy follows the US Federal Reserve because the city's currency is pegged to the US dollar.
"The unprecedented coordinated rate cuts by global central banks shows the seriousness of the financial crisis of this century,'' Yam said today. "I hope the cuts will help solve the problems, though the impact may take some time to filter through into the markets.''
The US Federal Reserve yesterday lowered its benchmark rate by half a%age point to 1.5%. The US Federal Reserve, European Central Bank and four other central banks yesterday reduced interest rates in a coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.
Hong Kong's de facto central bank said yesterday it's changing the formula for calculating the base rate to help boost liquidity, effectively cutting the rate to 2.5% from 3.5%. Starting today, the rate is set by adding 50 basis points to the US Federal Reserve's Funds rate, compared with the previous 150 basis points gap. A basis point is 0.01%age point.
Hong Kong Financial Secretary John Tsang said today the concerted rate cuts will help boost liquidity, helping stabilise the markets. He urged the different segments of the Hong Kong community to work together to overcome the challenges brought about by the crisis.
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