HK worries on negative interest rates

Beware of negative real interest rates.

With the inflation rate staying at levels above the deposit rate, there is a strong incentive for consumers to spend, rather than to save. In doing so, consumers, especially those in an economy as open as that of Hong Kong, are well advised to exercise some restraint and keep an eye on the economic horizon where dark clouds of a looming US-led global slowdown are gathering fast.

More worrisome, at least to economic planners, is the impact that the negative interest rate can have on asset, particularly property, prices. This is of special significance to cities like Hong Kong where the supply and demand of properties are seldom in equilibrium because of the usually long time lag in the completion of large-scale housing projects.