The Hong Kong Monetary Authority/HKMA lowered its base rate by 25 basis points to 2.5 percent on August 1st, 2019. This marked the first rate cut since late 2008, tracking a similar move by the US Federal Reserve as Hong Kong's currency is pegged to the US dollar. The central bank sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBOR (Hong Kong Interbank Offered Rate), whichever is higher. However, HKMA warned that HIBOR would continue to be influenced by local supply and demand conditions and may not immediately follow the move in LIBOR. Also, the city's financial market and currency has not been affected by the recent social unrest in the city, added HKMA Chief Executive, Norman Chan. Interest Rate in Hong Kong averaged 3.35 percent from 1998 until 2019, reaching an all time high of 8 percent in May of 2000 and a record low of 0.50 percent in December of 2008.
Interest Rate in Hong Kong is expected to be 2.50 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Interest Rate in Hong Kong to stand at 2.25 in 12 months time. In the long-term, the Hong Kong Interest Rate is projected to trend around 2.75 percent in 2020, according to our econometric models.