Hong Kong’s de facto central bank said yesterday it would trim its benchmark interest rate by 1 percentage point to 2.5 percent to encourage lending amid the global credit crunch.
The move by the Hong Kong Monetary Authority (HKMA), effective today, is a break from the territory’s traditional pattern of closely tracking the US Federal Funds target rate, now at 2 percent, because of the local currency’s peg to the US dollar.
“One has to do extraordinary things at extraordinary moments,” said Jacky Choi (蔡雅頌), a Hong Kong-based fund manager at Value Partners Ltd (惠理基金管理公司), which manages about US$5 billion in Asia.
PHOTO: AFP
Choi described the authority’s decision as reasonable, saying it would help local banks solve their short-term liquidity problems but would not likely bring immediate relief to the plunging stock market.
The authority said in a statement that Hong Kong’s base rate — the reference for lending overnight funds to local banks through its discount window — would be slashed to 2.5 percent from 3.5 percent today.
The cut came after the HKMA revised its formula for calculating its base rate from 150 basis points above the prevailing US fed funds rate to 50 basis points, it said.
The 150 basis points “is larger in Hong Kong than elsewhere, and has become unjustified, particularly in the light of stressful conditions in global financial markets,” said HKMA Chief Executive Joseph Yam (任志剛) in a statement.
On Tuesday, Federal Reserve Chairman Ben Bernanke gave a gloomy assessment of the US economy, appearing to open the door wider to an interest rate cut in the US on or before the central bank’s next meeting on Oct. 28 and Oct. 29.
The Fed’s key interest rate now stands at 2 percent.
The Fed in June had halted an aggressive rate-cutting campaign to revive the economy out of fear those low rates would aggravate inflation.
Since then, financial and economic conditions have deteriorated, while record-high energy prices have calmed, giving the Fed more leeway to again cut rates.
In a speech to the National Association for Business Economics, Bernanke warned the country could be stuck in the economic doldrums for some time.
“The outlook for economic growth has worsened,” Bernanke said. “The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance.”
Wall Street turned its back. The Dow Jones industrials lost 508 points, more than 5 percent, to close at 9,447, the lowest since Sept. 30, 2003.
The Standard & Poor’s 500, a broader stock index, closed below 1,000 for the first time since that same day.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique