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Hong Kong cuts key interest rate by 0.5 pc

This article was posted on Oct 9, 2008 and is filed under Press Releases

HONG KONG: The Hong Kong Monetary Authority on Thursday cut its key interest rate by 50 basis points following similar moves by central banks across the world. The city’s de facto central bank made the move after announcing Wednesday it would change the formula for calculating its rate, effectively already lowering it by 100 basis points.

With the two moves, the base rate was lowered to 2.0 per cent on Thursday from 3.5 per cent, as the HKMA tried to ease the pressure on banks caught up in the credit crunch.

Hong Kong’s currency is pegged to the US dollar, and the city usually follows changes to the US rate.

“The (impact of the) rate cuts will take some time to take effect,” the HKMA’s chief executive Joseph Yam said, according to Dow Jones Newswires.

He said it will filter through to the retail banking sector and therefore help lower funding costs for small to medium-sized corporations.

When asked whether he was aware that major central banks would cut rates when he announced the HKMA’s plan to change its base rate formula Wednesday Yam said: “What do you think?”

Hong Kong’s benchmark Hang Seng Index jumped 2.7 per cent in morning trade Thursday, reflecting the global interest rate cuts, but doubts remained about investor confidence.

source: Economictimes

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