FX.co ★ Hong Kong Maintains Base Rate at 4% After Fed Move

The Hong Kong Monetary Authority (HKMA) decided to maintain its base rate at 4.0% as of January 29, 2026, in line with the U.S. Federal Reserve's earlier decision to hold its target range between 3% and 3.75%. This rate is determined through the overnight discount window, reflecting Hong Kong's strong alignment with U.S. monetary policies given the Linked Exchange Rate System, which pegs the Hong Kong dollar between 7.75 and 7.85 to the U.S. dollar. Consequently, local interest rates tend to mirror U.S. trends regardless of domestic economic conditions. This decision occurs amid signs of economic recovery in Hong Kong, evidenced by a continuous increase in housing prices for seven consecutive months as of December and a 3% increase in 2025, marking the first annual improvement in four years. The city’s economy saw acceleration with a 3.8% year-on-year growth in Q3 2025 compared to 3.1% in Q2, which is the fastest rate in nearly two years. This growth was driven by robust consumer spending, stable export levels, and a revival in tourism. Nonetheless, high borrowing costs suggest that the recovery remains uneven despite the positive momentum.