Prime rate unchanged

HSBC Holdings said yesterday it would keep its best lending rate in Hong Kong unchanged at 5.25 percent, despite a 50 basis point cut in the US federal funds rate.

The Hong Kong Monetary Authority (HKMA) slashed its discount window base rate to 1.5 percent after the US Federal Reserve cut its benchmark rate to 1 percent on Wednesday, a move aimed at easing credit and supporting the US economy, which analysts say risks falling into a prolonged recession.

Hong Kong officially tracks US rate moves because its currency is pegged to the US dollar, but local banks have some leeway to lag US rate decisions.

HK dollar little narrowed

The Hong Kong dollar was trapped in a narrow range yesterday, while local interbank lending rates fell after the US Federal Reserve and Hong Kong's central bank lowered their interest rates.

The local currency was quoted at 7.7525/27 per US dollar at 0900 GMT, little changed from late Wednesday trade in Asia, after shuffling between 7.7509 and 7.7530.

Local interbank rates fell across the board, with the one-month Hibor fixing at 2.44786 percent, its lowest since Sept 17.

It was down 44 basis points from Wednesday.

Interbank rates had softened in the past few days after the recent liquidity injections by the HKMA.

Reuters

(HK Edition 10/31/2008 page2)