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Composite Interest Rate : End of July 2008 The Hong Kong Monetary Authority (HKMA) announced today (Tuesday) the composite interest rate at the end of July 2008.1 The composite interest rate, which reflects the average cost of funds of banks, rose slightly by 3 basis points to 0.88% at the end of July 2008, from 0.85% at the end of June 2008 (see Chart 1 in the Annex). This followed an increase of 10 basis points in June 2008. The mild increase in the composite interest rate in July 2008 reflected modest upward adjustments of time deposit rates, which more than offset the decrease in interbank rates, while savings deposit rates were unchanged (see Chart 2 in the Annex).2 During the first half of August, interbank rates were steady, in line with the movement of US interest rates, as financial markets expected the US Federal Reserve to keep its target for the federal funds rate unchanged for the time being. Looking ahead, the composite interest rate will continue to be influenced by changes in US interest rates and global financial market conditions. The historical data of the composite interest rate from the end of the fourth quarter of 2003 to the end of July 2008 are available in the Monthly Statistical Bulletin on the HKMA website (www.hkma.gov.hk). The next data release is scheduled for 19 September 2008 and will provide the composite interest rate at the end of August 2008.
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1 The composite interest rate is a weighted average interest rate of all Hong Kong dollar interest bearing liabilities, which include deposits from customers, amounts due to banks, negotiable certificates of deposit and other debt instruments, and Hong Kong dollar non-interest bearing demand deposits on the books of banks. Data from retail banks, which account for about 90% of the total customers’ deposits in the banking sector, are used in the calculation. It should be noted that the composite interest rate represents only average interest expenses. There are various other costs involved in the making of a loan, such as operating costs (e.g. staff and rental expenses), credit cost and hedging cost, which are not covered by the composite interest rate.
2 During July, HIBORs dropped across-the-board by 0.4 to 69.6 basis points, except for funds with a maturity of one month which rose by 3.9 basis points.
Annex
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