(Xinhua)
Updated: 2008-03-20 14:03

Hong Kong's Monetary Authority announced Wednesday to slice its base rate by three quarters of a percentage point to 3.75 percent after the US Federal Reserve's overnight rate cut.

Related readings: Fed poised to cut interest rates again US Fed moves may be just 'symbolic' Chinese stocks rebound despite tightening measures Yuan rises to record high against greenback

Joseph Yam, chief executive of the city's de facto central bank, said local banks in Hong Kong will make their own decisions whether to follow the US rate cut or not, adding it is understandable if they do not make the same reduction as the savings rate is already rather low in the city.

The US central bank cut its benchmark fed funds rate by 75 basis points to 2.25 percent on Tuesday, the lowest level in over three years.

The Hong Kong interbank offered rate will be lowered, Yam said, expressing his belief the cuts will benefit the local economy.

Yam said as the United States and the Chinese mainland are Hong Kong's two major markets, their economic situations will have an impact on the city.

Since both are facing high inflation, Hong Kong's inflationary rate will also remain high, he said.

Hong Kong's base rate is currently set at either 150 basis points above the prevailing US federal funds target rate or the average of the five-day moving averages of the overnight and one- month Hong Kong Interbank Offer Rate (HIBOR), whichever is higher.