HKMA Follows Fed in Maintaining Benchmark Interest Rate at 4%
Miles Bennett
The Fed held rates at 3.5%–3.75%; hours later the HKMA followed, keeping its base rate at 4%. New Chair Warsh stressed zero flexibility on the 2% inflation target — leaving Hong Kong equities and property with limited upside.
What did the Fed and the HKMA each decide?
The Fed concluded its fifth FOMC meeting this year, holding the federal funds rate at 3.5%–3.75%.
The HKMA then held its base rate at 4%. This means → under the linked exchange-rate system, the HKMA has almost no independent room; when the Fed stays put, Hong Kong stays put.
Why did Warsh single out "there is only one target"?
New Fed Chair Kevin Warsh stated plainly: "There is no soft inflation target — only one target, and that is 2%."
He noted that five years of high inflation left some households and markets with a false impression that the Fed's implicit target sits above 2%.
In plain terms = Warsh is telling markets: do not bet that we will tolerate higher inflation, and do not front-run rate cuts.
What were markets pricing in beforehand?
CME FedWatch data showed 67.9% of traders expected no change; the rest bet on a 25-basis-point hike.
This means → a hold was the consensus call. The real suspense is not this meeting but how the Fed moves after the next inflation print.
What does this mean for Hong Kong property and equities?
Tommy Ong, managing director of T.O. & Associates, said the hold is "mildly positive for Hong Kong real estate and equities."
He warned, however, that the direction of the next U.S. inflation reading is highly uncertain, leaving very limited room for price gains.
In plain terms = no hike is good news, but only just — markets are waiting for a clearer signal before committing.
Content is for reference only, not financial advice.