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Transcript of remarks by FS at media session on US rate hike (with video)
     Following is the transcript of remarks by the Financial Secretary, Mr Paul Chan, on the United States Federal Reserve Board rate hike today (June 16):
Reporter: Mr Secretary, what do you expect the latest interest rate hike in the Federal Reserve would have any impacts on the Hong Kong market?
Financial Secretary: The US Federal Reserve has raised the interest rate by 75 basis points, which is the highest since 1994. This substantial hike is actually in line with recent market expectations, because the inflation rate in the US is very high, at about 8.6 per cent. This high inflation rate will be there for quite some time, so the US will continue to increase its interest rate and also reduce the size of its balance sheet. For the impact from a global stand point, the external economic situation will deteriorate, perhaps making it more difficult for us in terms of our exports.

     Under the Linked Exchange Rate System, our interest rate will no doubt be affected by the rate hikes, though the magnitude and the pace may not be the same. But given the widening interest rate gap, there would be market activities to take advantage of the difference. As we have seen in the past two months, there are capital flowing out from the Hong Kong market, but we do not need to worry. This is a natural move under the Linked Exchange Rate System, and we have very strong buffer. At the moment, we have over $280 billion in interbank balance. Also, our banks are still very healthy in terms of liquidity position, capital adequacy ratio, and risk exposure to classified loans, etc. 

     To us in Hong Kong, we need to pay attention to external risk. Because given the interest rate hikes, for some emerging markets whose economic fundamentals are not as strong, they may be subject to additional risks and there would be increased volatility in the financial market. This is something we have to pay attention to. On the other hand, given the rising interest rate, asset price may be affected, so for people who want to take on mortgage loans, want to invest in different classes of assets, do pay extra attention and make proper assessments of one's affordability.
(Please also refer to the Chinese portion of the transcript.)
Ends/Thursday, June 16, 2022
Issued at HKT 17:39
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FS meets the media