Hong Kong Holds Interest Rate Unchanged at 0.50%

The Hong Kong Monetary Authority held its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25% until mid 2013.  Norman Chan, HKMA Chief Executive, said previously: "I don't think the ratings downgrade should impact the US government bond interest rate. International investors will continue to view US government debt as the safest and the most liquid tool for investment and risk-averse purposes,"... and "growth momentum in the US will be slow in the second half, but the risk of a double dip recession is not very high."

Earlier this week Chan said: "The Hong Kong dollar peg has been working well since its adoption in 1983. It's the foundation for the stability of the currency and financial system in Hong Kong so we have no intention to make any change," according to Reuters.  The Hong Kong dollar is fixed against the U.S. currency at an exchange rate of between HK$7.75 and HK$7.85 per dollar.

The HKMA also previously held its base interest rate unchanged at 0.50%, after the FOMC met in June this year.  The Hong Kong Monetary Authority generally tends to follow the monetary policy decisions of the US Federal Reserve's Federal Open Market Committee as the Hong Kong Dollar is fixed against the United States Dollar.  Hong Kong reported consumer price inflation of 5.6% in June, up from 5.2% in May and 4.6% in April this year.

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