Hong Kong and Serbian Interest Rate Decisions

November 5, 2009

Hong Kong domestic monetary policy is subordinated to currency policy, which since 1983 has pegged the Hong Kong dollar to its U.S. counterpart at 7.75.  Following the Fed’s decision yesterday to leave the Fed funds target unchanged at 0-0.25%, it was a no-brainer that the Hong Kong Monetary Authority would leave its base rate unchanged at 0.5%, that’s exactly what was announced today.

A 100-basis point reduction of the two-week repo rate to 10% by the National Bank of Serbia was twice as much as analysts expected, and more cuts are probable, since the new rate level still exceeds inflation.  The central bank has a wide inflation target band for next year of 4-8%.  So far this year, the rate has been slashed by 775 basis points easily offsetting a prior 200 basis point increase implemented in October 2008.  The latest down-move followed a pause at last week’s policy meeting and was synchronized with the government’s announced budget cuts.  The key Serbian interest rate was reduced prevously by 125 basis points last January, 250 bps in two moves during April, 100 bps in June, 100 bps in July and 100 bps in early October.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


Comments are closed.