GOVT MONITORS US RATE HIKE RISKS

Financial Secretary Paul Chan said that while he believes the latest rate hike in US will not pose a risk to Hong Kong's financial system, the Government is monitoring the situation.

Mr Chan made the statement while speaking to the media after attending an event this morning.

“The US has increased the interest rate by 75 basis points. Together with the earlier increases, altogether so far this year, they have increased their interest rate by 3 percentage points. And given the continuing heightened inflation rate, they expressed the likelihood of continuing increasing their interest rate in the remainder of this year.”

However, the Financial Secretary warned that external demand will suffer due to such a rate increase and on account of that, it will harm Hong Kong’s exports performance. Still, he does not believe it will lead to a sharp drop in the city’s property market.

“So the external environment given this high interest rate situation is that the economic growth in the US will be slowing down. There is a similar situation in Europe and the UK. So external demand will suffer because of the high interest rate environment. Consequently, our exports will suffer. We have to be very careful. Economic-wise, one of the key drivers of our economic growth, that is exports, will be affected.

“Given the heightened interest rate, the sentiment of the property market, obviously, has been affected and will continue to be affected by this factor. But as you know, the housing market depends on a number of factors. The interest rate is, of course, one, but we have to look at, also, the demand and supply situation, the employment situation, the repayment capability of home owners, the financial position of the developers and individual households.

“So taking all these into account, I do not think there would be a risk of a sharp adjustment in the property market. But obviously, given the dampened sentiment, you can tell from the recent figures, the transaction volume has come down, and prices have adjusted a little. So we will continue to monitor the situation, but we do not believe there would be a risk to the financial system.”

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