HKMA Chief Sees More Rate Adjustments Ahead

The Hong Kong Monetary Authority chief said on Thursday that a rate cut by the Federal Reserve indicates more such moves ahead to boost the US economy.

He was speaking after the HKMA lowered the base rate by 25 basis points to 2.5 percent, following the lead of the Fed, which cut its main interest rate for the first time since 2008.

HKMA chief executive, Norman Chan, said the cut was significant as it marks a reversal of the interest rate normalisation in the US.

"It may indicate a beginning series of moves towards monetary accommodation. In the short term this change could be supportive of the US economy," he said. "However in the medium and long run, its impact on the real economy, inflation and asset market is highly uncertain."

Chan also said the Hong Kong dollar's peg to the greenback is proving to be very resilient.

"During the last few months, despite the social unrest we have not noticed any erosion of the confidence of the Hong Kong dollar," he said.

Chan said the Hong Kong dollar rate in fact has strengthened slightly due to other factors and that is a good indication that the linkage is a very good system.