The Hong Kong Monetary Authority (HKMA) set its Base Rate at 4.25% effective immediately on 17 September, following a 25-basis-point upward adjustment to the US federal funds rate announced the previous day. The Base Rate serves as the foundation for computing Discount Rates on repurchase transactions through the HKMA’s Discount Window facility.
- New Base Rate: 4.25%
- Effective Date: 17 September 2026
- US Fed Rate Component: 50 basis points above the lower end of the federal funds target range
- HIBOR Component: Average of five-day moving averages of overnight and one-month rates at 2.50%
The HKMA employs a pre-set formula to determine the Base Rate, selecting the higher of two benchmarks: 50 basis points above the lower bound of the US federal funds target range, or the average of five-day moving averages of overnight and one-month Hong Kong Interbank Offered Rates (HIBORs). Following the Federal Reserve’s rate decision on 16 September, the US-linked component reached 4.25%, while the HIBOR average stood at 2.50%, triggering the automatic increase.
The adjustment reflects Hong Kong’s currency peg to the US dollar and the interconnected nature of regional monetary policy. As the US Federal Reserve tightens monetary conditions, Hong Kong’s banking system experiences corresponding rate pressures that flow through to the HKMA’s operational framework. The Base Rate determination mechanism ensures that Hong Kong’s liquidity facility rates remain appropriately calibrated to prevailing market conditions and international monetary developments.
