Interest Rate Cuts on the Horizon: What’s Next for Hong Kong and the US?
As the world’s leading economies navigate the complexities of monetary policy, analysts are predicting a series of interest rate cuts in 2025. Following the US Federal Reserve and Hong Kong Monetary Authority’s (HKMA) decision to slash their key policy rates by a full percentage point in 2024, experts believe at least two more rate cuts are on the cards for next year.
Hong Kong’s Lending Rate Set to Plummet
Hong Kong banks may further reduce their lending rate to a historic low of 5%, a move that would significantly benefit the economy and property sector. This prediction comes as the market expects the Fed to hit pause on rate cuts in the first half of 2025, followed by two or three reductions in the second half, totaling 50 to 75 basis points.
A Shift in Monetary Policy
Eddie Yue Wai-man, CEO of HKMA, hinted that the US will continue to cut rates next year, albeit at a slower pace than initially expected. This shift in monetary policy is largely driven by the need to control inflation and unemployment rates, as well as the overall economic environment.
The Impact on Hong Kong’s Property Market
A continuing trend of interest rate cuts will lower the cost of funding and reduce mortgage repayments, ultimately benefiting Hong Kong’s property market and overall economy. Raymond Yeung, chief economist for Greater China at ANZ Banking Group, believes that Hong Kong lenders will continue to cut prime rates as they compete for mortgage and other bank loans.
Diverging Opinions on Rate Cuts
While some experts predict a more aggressive approach to rate cuts, others are more cautious. Tommy Ong, managing director of T.O. & Associates Consultancy, expects the Fed to cut interest rates three times next year, while Philip Tso, head of institutional business for Asia-Pacific at Allianz Global Investors, believes the US will hit pause on rate cuts in the near term.
The Bigger Picture
As the world’s leading economies navigate the complexities of monetary policy, one thing is clear: interest rate cuts will have far-reaching implications for the global economy. Whether you’re an investor, a homeowner, or simply a curious observer, understanding the intricacies of monetary policy is crucial for making informed decisions in today’s fast-paced financial landscape.
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