Market Analysis: Expected Fed to make a slight rate cut in September, Hong Kong Interbank Offered Rate (HIBOR) follows suit, providing positive support to the property market

Zhitong
2024.08.01 06:18
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The Federal Reserve has a rationale for the first rate cut within the year, expected to start as early as September. If the US interest rate falls, the Hong Kong interbank rate may follow suit to fall to 4% or below, providing positive support for the Hong Kong property market. The US Consumer Price Index has fallen for three consecutive months to 3%, making progress towards the 2% inflation target, with employment growth also slowing down. The European Central Bank and the Bank of Canada have also cut interest rates, coupled with future trends in inflation, financial markets, and labor markets, it is expected that the Federal Reserve will implement a "shallow rate cut". The rate hike by Hong Kong banks is expected to be modest, with the pace of rate cuts determined by the trend of interbank rates, external factors, and strategies. The new mortgage rate for Hong Kong banks will be maintained at 4% or above

According to the Wise Finance APP, after the Federal Reserve's interest rate decision, the benchmark interest rate was maintained at 5.25% to 5.5%, unchanged for the 8th consecutive time, in line with market expectations. On the same day, HSBC announced that the Prime Rate (P) remains unchanged at the current level of 5.875%. Chief Vice President of Mortgage Referral at Elites Mortgage, Cao Deming, stated that the Federal Reserve has a rationale to cut interest rates for the first time this year, and it is not ruled out that a "shallow rate cut" may start as early as September. If the US interest rate falls, the Hong Kong interbank rate may follow suit to fall to 4% or below, providing positive support to the Hong Kong property market.

Cao Deming pointed out that the latest US Consumer Price Index (CPI) in June fell for 3 consecutive months to 3%, hitting a new low in the past 12 months, and inflation has fallen to the target of 2%, showing further progress. Employment growth in the US has also slowed down. In addition, the European Central Bank cut interest rates once in June, and the Bank of Canada also cut interest rates twice in June and July. It is believed that the Federal Reserve has a rationale to cut interest rates for the first time this year. The US interest rate has been at a high level since July last year, approximately 12 months ago. Based on future trends in inflation, financial markets, and labor markets, it is estimated that the Federal Reserve may start a "shallow rate cut" as early as September.

Cao Deming believes that if the US interest rate falls, the Hong Kong interbank rate may follow suit to fall to 4% or below, providing positive support to the Hong Kong property market. During this interest rate hike cycle, the rate hikes by Hong Kong banks have been much lower than those in the US. It is expected that Hong Kong banks will decide on the pace of interest rate cuts based on the trend of interbank rates, various external factors, and their own strategies. The new mortgage interest rates offered by Hong Kong banks this year will be maintained at 4% or above. Prospective property buyers should still pay attention to interest rate trends and changes in the market environment, and assess their own affordability before entering the market

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