Today, the Hong Kong Monetary Authority has established a Base Rate of 5.25% to immediately come into effect using an existing and certified formulaic approach.
This rate serves as the base point from which discount rates for repurchase transactions at their Discount Window are computed – calculated through either a 50 basis points increase from US federal Reserve target range or five-day moving averages between overnight and one-month HIBORs (Hong Kong Interbank Offered Rates).
Following the 25-basis point upward adjustment in the target range for the US federal funds rate on March 22 (US time), 50 basis points above the lower end of the prevailing target range for the US federal funds rate is 5.25 per cent, while the average of the five-day moving averages of the overnight and one-month HIBORs is 2.61 per cent.
The Base Rate is therefore set at 5.25 per cent according to the pre-set formula.
Sources: THX News & Hong Kong Monetary Authority.