HONG KONG: The Hong Kong Monetary Authority (HKMA) raised its benchmark interest rate by 25 basis points, after the United States Federal Reserve (Fed) did the same, saying it wants to maintain stability in the financial system amid heightened market volatility.

       The base rate was increased to 0.75% from 0.5%, it said in a statement on its website. The rate moves in lockstep with the Fed’s rate since the Hong Kong dollar is pegged to the US currency.

       Local banks like HSBC Holdings Plc, Standard Chartered Plc and Hang Seng Bank Ltd tend to follow the HKMA’s move by adjusting their best lending rates, although they’re not obliged to do so.

       The HKMA said past experience shows that Hong Kong dollar interbank rates may not necessarily rise in tandem with US moves.

       The rate hike comes at a time when Hong Kong’s economy has been throttled by its worst virus outbreak ever, which has prompted the government to tighten restrictions.

       Economic indicators such as retail sales and the purchasing managers’ index have slumped, supply chains have been disrupted, and a much-anticipated reopening with mainland China has been delayed.

       Economists have been steadily downgrading their growth forecasts for the year.

       The monetary authority cautioned that the global outlook remains uncertain, which could yet slow the Fed’s pace of rate hikes.

       “The HKMA will continue to closely monitor market situations, with a view to maintaining stability in Hong Kong’s financial and monetary systems,” chief executive Eddie Yue said in the statement. — Bloomberg