(Bloomberg) -- The Hong Kong Monetary Authority cut its base interest rate after the Federal Reserve eased policy, though relief may be limited as the risks of potentially inflationary policies in the US under Donald Trump are set to pare back the easing path.
The HKMA lowered rates by a quarter-percentage point to 5% on Friday, in a move that should bolster an economy struggling with weak spending. Decisions move in lockstep as the city has a currency peg to the greenback.
While the cut may help lower borrowing costs, the future pace of easing remains unclear, especially after the reelection of Trump as US president. He’s vowed steep tariffs on imports that could keep inflation in the world’s biggest economy higher for longer.
“The pace of future rate cuts remains uncertain,” the city’s de facto central bank said in a statement, adding that “monetary policies across the major economies are not entirely in sync.” Officials are closely monitoring risks of global financial market volatility, the statement added.
Still, the cut in Hong Kong will be welcome by businesses and homeowners who have faced years of steep borrowing costs. That’s been a major drag on the financial hub’s housing market and economy that slowed to the weakest pace in five quarters.
HSBC Holdings Plc, the city’s largest lender, cut its best lending rate to 5.375% from 5.625%, trimming the reference rate for mortgage and other loans for the second time in two months.
Additional relief may be farther away. Some economists now expect fewer rate cuts from the Fed next year as trade tariffs may boost inflation at home. That could reshape the easing path for central banks around the world, and add currency pressure on emerging markets.
In Hong Kong, that could delay long-expected support for the beleaguered property sector. A recent raft of stimulus in China may boost spending and investment in the city, although their effects remain to be seen.
(Updates with HKMA statement, HSBC prime rate cut)
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