(19 March 2026 – Hong Kong) HKMA leaves city’s base rate untouched at 4 per cent, as HSBC, Standard Chartered and BOCHK keep prime lending and saving rates unchanged.
The Hong Kong Monetary Authority (HKMA) has warned the public to beware of interest rate risks after it kept its base rate unchanged, following a similar move by the US Federal Reserve, as the city’s de facto central bank said the Middle East conflict has added to the uncertainty over the pace of rate cuts this year.
HKMA maintained the city’s base rate at 4 per cent on Thursday. Hours earlier, the Fed kept its target rate in the range of 3.5 per cent to 3.75 per cent, after the second meeting of the Federal Open Market Committee (FOMC) this year.
HSBC, Standard Chartered and Bank of China (Hong Kong), the city’s three note-issuing banks, said they would keep their prime lending and savings rates unchanged. Other lenders are expected to announce their rate decision soon.
“The market generally considers that the path of US monetary policy remains quite uncertain, while recent tensions in the Middle East region introduce greater uncertainty to oil prices as well as the outlook for US inflation,” the HKMA said in a statement.
“The future trend of US interest rates is quite uncertain, which may influence the interest rate environment in Hong Kong. The public should carefully manage interest rate risks when making decisions about property purchase, investment or borrowing.”
The uncertainties have dragged down markets, with the benchmark Hang Seng Index falling 2 per cent on Thursday, after the Dow Jones Industrial Average dropped 1.6 per cent after the Fed’s rate decision.
“Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East,” Fed chairman Jerome Powell said in a media briefing after the FOMC meeting.
“Higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.”
The Fed’s decision was widely expected, with 98.9 per cent of traders forecasting no change and the rest expecting a 25 basis point increase, according to CME FedWatch data based on Fed funds futures contracts on Wednesday.
The Fed decision was taken against the backdrop of the conflict in Iran, which showed little sign of easing and was diminishing the prospects of any rate cut soon because energy-led inflation remained a credible risk, said Jacky Lam, senior vice-president at Charles Schwab Hong Kong.
“Markets have also pushed back expectations for the first rate cut to the summer of next year, from two cuts previously anticipated in 2026,” Lam said. “A key driver behind this reassessment is the sharp rise in energy prices linked to tensions in the Middle East, prompting investors to re-evaluate the inflation outlook.
“Attention is firmly fixed on energy markets, with fuel prices rising sharply for US consumers. Until there is greater clarity on how the conflict will unfold, expectations of an imminent rate cut remain firmly off the table.”
The US-Israeli war with Iran, which started on February 28, has driven up oil prices and sparked inflation fears, a situation that analysts believe reduces the chances of any quick rate cut.
Powell’s term as Fed chairman is set to end in May. US President Donald Trump has nominated Kevin Warsh to succeed Powell, subject to Senate confirmation. Powell said he would stay on until Warsh was confirmed.
Analysts said they expected the change in the Fed’s leadership would add further uncertainty to interest rate movements due to Powell’s historical stance against financial easing.
The US unemployment rate rose to 4.4 per cent in February, from 4.3 per cent in January, but below the 4.5 per cent recorded in November, which was the highest since 2021. The US inflation rate stood at 2.4 per cent in February, the same as in January, but down from the 3 per cent registered in September and closer to the Fed’s target of about 2 per cent.
Under a currency peg known as the Linked Exchange Rate System, Hong Kong’s monetary policy has moved in lockstep with Fed policy since 1983, so the HKMA will always cut the base rate following a US rate cut, but commercial banks can decide when and how to cut their prime and savings rates.
HSBC and its subsidiary Hang Seng Bank, as well as Bank of China (Hong Kong), have set their prime rate at 5 per cent, while Standard Chartered and most other major lenders have set theirs at 5.25 per cent. Banks’ savings rate currently stands at 0.001 per cent for customers with deposits above HK$5,000 (US$641), while those with less do not earn interest.
“The FOMC will wait for proof that the disruption in the supply of oil, gas and fossil fuel-related commodities will not develop into a persistent trend of higher inflation,” said Tommy Ong, managing director of T.O. & Associates Consultancy. “Hence, they may postpone the cut to September.”
If the US cuts the interest rate in September, Hong Kong’s interbank rates will probably not move too much lower because the overnight Hong Kong interbank interest rate (Hibor) is already 2 per cent below the US equivalent, leaving little room for any further cut.
The one-month Hibor stood at 2.0546 per cent on Thursday, compared with 2.4579 per cent a month earlier and 3.7831 per cent a year earlier.
Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral, said he expected the US to cut rates once this year, most likely in the second half.
Source: South China Morning Post