No Change in Hong Kong’s 0.5% Base Rate

August 11, 2010

As sure as day follows night, the Hong Kong Monetary Authority matched the Fed’s Tuesday decision not to change its key interest rate.  The Base Rate has been at 0.5% since late 2008, yielding a 25-50 basis point premium on the Fed funds target range of 0-0.25% over that span.  Hong Kong has not had an independent domestic monetary policy since October 1983, when officials pegged their currency to the U.S. dollar at a parity of HKD 7.8 per USD.  Hong Kong is one of Asia’s big success stories in the post-great recession era.  Real GDP expanded at a 10.4% annualized rate in the first quarter of this year and by 8.2% from 1Q09.  CPI inflation is back at 2.8% versus minus 0.9% in mid-2009.  The former British colony is running surpluses in both its budget and current account and has a sub-5.0% rate of unemployment.

Further background on Hong Kong’s exchange rate policy can be read by clicking here.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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