Hong Kong’s de facto central bank cut the base interest rate for the second time in six weeks, further reducing the cost of funding to help reboot the city’s businesses and reduce the burden on mortgage borrowers.
The Hong Kong Monetary Authority (HKMA) cut the base rate by a quarter point to 4.25 per cent on Thursday, hours after the US Federal Reserve pared its target rate by the same margin to a range of 3.75 per cent to 4 per cent during the seventh meeting of the Federal Open Market Committee (FOMC) this year. The new base rate is the lowest for Hong Kong since November 2022.
Together with a quarter-point rate cut in September, central banks in Hong Kong and the US have cut the key interest rate by half a percentage point.
The Fed’s decision was widely expected, with 99.9 per cent of traders predicting a 25-basis-point cut, according to Tuesday’s data from CME FedWatch, which is based on Fed fund futures contracts.
A fruit stall at the Bowrington Road Market in Causeway Bay on July 19, 2025. Photo: Dickson LEE
The main reason the Fed eased monetary policy was “emerging cracks in previously solid jobs dynamics”, said David Kohl, chief economist at Julius Baer, in a research note on Tuesday. “Elevated inflation, partly driven by steep tariff increases on imported goods, makes gradual rate cuts of 25 basis points the preferred path of policy easing.”
