The Hong Kong Monetary Authority raised its base rate by 25 basis points to 2.75% on December 20th, 2018, tracking a similar move by the US Federal Reserve as its currency is pegged to the US dollar. The central bank sets its base rate through a formula that is 50 basis points above the prevailing US Fed Funds Target or the average of the five-day moving averages of the overnight and one-month HIBORS (Hong Kong Interbank Offered Rate), whichever is higher. Regarding increasing downside risks to the economy from ongoing trade row between China and the US, the monetary authority urged residents to remain vigilant for possible market volatility after US interest rate hikes.
