Hong Kong raises interest rates after latestmoves in US

Hong Kong raised its interest rates by a quarter point to 1 percent on Thursday, with immediate effect according to a preset formula, for the first time in a year, following the 25-basis point upward shift of US federal funds rate last night.

Norman Chan Tak-Lam, chief executive of the Hong Kong Monetary Authority, said the increase of US interest rates earlier is within expectation and a gradual path of interest rate hike in the next three years is expected, adding that Hong Kong interest rate will over time track US dollar interest rate movements.

Chan elaborated that the pace of US monetary policy normalization remains uncertain due to the tightening labor market, rising energy and commodity prices, and the fiscal policy of the incoming US administration. The three factors may have a significant impact on inflation and inflation expectation going forward.