Hong Kong banks trim prime rates by a quarter point, meeting Fed’s aggressive cut halfway Five of Hong Kong’s major commercial banks cut their prime rates for the first time in almost five years, after the local monetary authority followed the US Federal Reserve in kicking off a rate-cut cycle. Bank of China (Hong Kong), HSBC and its Hang Seng Bank unit will trim their prime lending rates by a quarter percentage point to 5.625 per cent, and cut their savings rate by the same margin to 0.625 per cent per annum for deposits that exceed HK$5,000 (US$640), the banks said in separate statements on Thursday. Standard Chartered and Bank of East Asia will pare the loans rate for their best customers by a quarter point to 5.875 per cent, and will reduce their deposit rate to 0.625 per cent, back to the level of November 2022. The cuts translate to savings for borrowers who tie their loans to prime rates. For a typical HK$5 million loan of 30 years priced at prime minus 1.75 per cent, the reduction lowers the mortgage rate to 3.875 per cent and shaves the monthly payment by HK$720 to HK$23,512, according to mReferral, a local mortgage broker. Earlier in the day, Hong Kong’s de facto central bank cut its base interest rate for the first time in four years in lockstep with the US Federal Reserve, which slashed its target rate by half a percentage point. Hong Kong’s Financial Secretary Paul Chan Mo-po said the rate cut “will be positive for local businesses, be supportive to capital markets” and lead to a “softening” of the local currency, which will attract tourists and support consumption in the retail and catering industries. Investors cheered the much-awaited rate cuts, boosting the key Hang Seng Index by 2 per cent, its biggest one-day percentage jump since July 31. The city’s base rate was cut by half a percentage point to 5.25 per cent, according to the Hong Kong Monetary Authority (HKMA), bringing it back to the level in March 2023. Hours earlier, the Fed slashed its target rate by an unexpectedly aggressive half-point to a range of 4.75 per cent to 5 per cent. “The ‘dot plot’ indicated that the Fed might continue to cut rates by a total of 50 basis points before year end, followed by a total of 100 basis points next year,” the HKMA’s acting chief executive Howard Lee said after the rate cut, reiterating his advice for the public to remain vigilant when faced with high borrowing costs. “The pace of future rate cuts remains uncertain because of multiple factors, such as whether inflation will stay at low levels, changes in labour market conditions, and how the economy reacts to the rate cuts.” A quarter-point cut was fully priced in and expected by the capital markets, based on the CME Group’s futures contracts, while only a third of traders were looking for a half-point reduction. “This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labour market can be maintained in a context of moderate growth and inflation moving sustainably down to 2 per cent”, Fed Chairman Jerome Powell said after the FOMC’s 11-to-1 vote for its bigger-than-expected cut. A cycle of declining interest rates will be welcomed by struggling Hong Kong business operators and mortgage borrowers. In the second quarter of this year, the city’s gross domestic product grew 3.3 per cent from a year earlier, following a revised year-on-year increase of 2.8 per cent in the first quarter. The one-month Hibor, typically used to price most mortgage loans, weakened to a 12-month low of 3.6144 per cent on Thursday, down from 3.7 per cent on Tuesday and 4.9853 per cent at the beginning of this year, according to the Hong Kong Association of Banks. “Hibor will fall due to the US interest rate cut, [as] the cycle will be favourable for more rate cuts,” said ANZ Banking Group’s Greater China chief economist Raymond Yeung. “The trend will be helpful to Hong Kong’s economy and business environment”. The HKMA has followed the Fed’s monetary policy since 1983 under its linked exchange-rate system, which preserves the local currency’s peg to the US dollar. Before the rate cut on Thursday, the HKMA and the Fed had kept their key lending rate at the current level since July 2023, when they last raised rates by a quarter point. https://www.scmp.com/business/article/3278874/hong-kong-cuts-base-rate-half-point-lockstep-us-feds-aggressive-bid-economy (ICE HONG KONG)

Fonte notizia: South China Morning Post