Hong Kong banks are likely to stop cutting interest rates even if United States borrowing costs fall further, HSBC Holdings Plc's head of Asia-Pacific said.
Hong Kong banks may refrain from reducing rates because of inflationary pressures in the city, Sandy Flockhart said at a briefing yesterday.
Bloomberg News reported that consumer prices in Hong Kong rose 3.8 percent in December, the fastest pace in nine years.
"There is a divergence between what's happening in the US and what's happening in Hong Kong," Flockhart said, referring to the city's economic expansion.
Also, "there is compression because we've already cut rates quite aggressively."
On January 31, HSBC cut its benchmark Hong Kong lending rate for the sixth time since September, bringing borrowing costs to their lowest in almost three years and adding fuel to a four-year property boom.
HSBC, the bank with the biggest network in Hong Kong, trimmed its so-called best rate a quarter-point to 5.75 percent.
The cut took the rate to the lowest since May 2005 and followed a half-point reduction by the US Federal Reserve the day before.
The Hong Kong Monetary Authority typically follows the Fed to defend the currency's peg to the US dollar.
The three-month Hong Kong Interbank Offered Rate has dropped to 2.32 percent from 5.45 percent on October 17.
The Fed is likely to cut interest rates by a quarter-point at its next meeting on March 19, Flockhart said.