HK cuts interest rate to aid bank lending amid turmoil

HONG KONG: The Hong Kong Monetary Authority (HKMA) announced it will cut its benchmark interest rate with effect from today in a bid to encourage bank lending, as the city's economy heads for downturn amid the global credit crunch.

The base rate for banks will drop to 2.5 percent from 3.5 percent, based on the US benchmark target rate plus 50 basis points, down from 150 basis points, HKMA's Chief Executive Joseph Yam said yesterday.

"Hong Kong's banking system is very stable but we are facing challenges," Yam told reporters.