Hong Kong’s interest rate cut will have a ripple effect on the economy beyond the immediate fiscal benefits for struggling small and medium enterprises (SMEs), with the move set to bolster investor confidence and spending sentiment, industry players have said.
Five of Hong Kong’s major commercial banks cut their prime rates for the first time in almost five years on Thursday, after the local monetary authority followed the US Federal Reserve in cutting rates.
The city’s base rate was cut by half a percentage point to 5.25 per cent, according to the Hong Kong Monetary Authority (HKMA), bringing it back to the level in March 2023. Hours earlier, the Fed slashed its target rate by an unexpectedly aggressive half-point to a range of 4.75 per cent to 5 per cent.
Financial Secretary Paul Chan Mo-po said the rate cut would be “positive for local businesses” and “supportive to capital markets” as it would lead to the “softening” of the local currency, which could attract tourists and support consumption in the retail and catering industries.
Danny Lau Tat-pong, honorary chairman of the Hong Kong SME Association, said the rate cuts would have far-reaching implications for the economy, exceeding the actual fiscal benefit it generated for the battered SMEs.
