Why the Hong Kong Monetary Authority should lower its benchmark interest

According to the Hong Kong Monetary Authority, the base rate will be cut by 25 basis points to 2.50% according to the pre-set formula, effective immediately. The move to cut the base rate comes in response to a 25 basis point cut in the target range for the federal funds rate in the United States on July 31st (US time). The Hong Kong Monetary Authority announced this morning that it would cut its benchmark interest rate by 25 basis points to 2.50 per cent.

 Why the Hong Kong Monetary Authority should lower its benchmark interest

According to the Hong Kong Monetary Authority, the base rate will be cut by 25 basis points to 2.50 per cent, with immediate effect, according to the pre-set formula. The move to cut the base rate comes in response to a 25 basis point cut in the target range for the federal funds rate in the United States on July 31st (US time).

The base rate is the base rate used to calculate the discount rate applicable to repurchase transactions through the discount window. The current base rate is set at the lower end of the current US Federal Funds Target range plus 50 basis points, or the average of the five-day moving average of overnight and one-month Hong Kong interbank rates, whichever is higher. It is worth noting that the move is also the first time since 2008 that the Hong Kong Monetary Authority has cut interest rates. U.S. stocks fell sharply after the Federal Reserve cut interest rates by 25 basis points.

In the early hours of August 1st, Beijing time, the Federal Reserve cut interest rates by 25 basis points, lowering the target range for the federal funds rate to 2.00%-2.25%, in line with market expectations and the first cut since the end of 2008. The Fed’s FOMC statement said it would end its drawdown program on August 1. U.S. stocks were weighed down on Wednesday by comments as the U.S. Federal Reserve announced its first interest rate cut in more than a decade, hinting at uncertainty over future rate cuts. All three major U.S. stock indexes fell more than 1 percent, with the Dow down nearly 500 points at one point.

 Why the Hong Kong Monetary Authority should lower its benchmark interest

Under the linked exchange rate system, the Hong Kong Monetary Authority has cut its benchmark interest rate by 25 basis points to 2.50 per cent. The Hong Kong dollar has been in contact with the exchange rate since 1983 and is pegged to the US dollar at HK$7.8 to the US dollar. The Hong Kong Monetary Authority has set the upper and lower limits of volatility for the exchange rate, with the weak party to exchange guarantee 7.85, the strong party to exchange guarantee 7.75, and the Monetary Authority will conduct currency trading at the highest and lower limits of exchange rate fluctuations in order to control the open market exchange rate. Hong Kong’s linked exchange rate system can limit the depreciation of the Hong Kong dollar to some extent, but once the weak exchange guarantee line is touched, there will be a passive tightening of the capital in the Hong Kong market. Despite the Federal Reserve’s announcement of a rate cut, U.S. stocks closed lower, and the ADR index of Hong Kong stocks was under pressure throughout the day, closing at 27,573 points, down 203 points, or 0.74 percent.

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