The Hong Kong Monetary Authority (HKMA) on Friday reduced its base rate by 25 basis points (bps) to 5.0%, following a similar move by the US Federal Reserve.

Major banks in Hong Kong quickly followed suit, with HSBC cutting its Hong Kong Dollar best lending rate by 25 basis points, and Bank of China (Hong Kong) also reducing its Hong Kong Dollar prime rate by the same amount.

“In light of another US rate cut and factors including economic and market conditions, HSBC decided to lower its Hong Kong Dollar deposit and lending interest rates,” according to a statement by Luanne Lim, chief executive officer of Hong Kong, HSBC.

The Asian financial hub's monetary policy aligns closely with the United States, as its currency is pegged to the US Dollar within a narrow range of 7.75 to 7.85 per Dollar, Reuters news agency reports.

“The pace of future rate cuts remains uncertain as it is subject to US economic data, which will be influenced by fiscal, economic and trade policies,” said a HKMA statement. 

The Fed cut rates by a quarter of a percentage point on Thursday as it began assessing what could become a more complex economic landscape with President-elect Donald Trump taking office next year.

Fed Chair Jerome Powell stated that the results of Tuesday's presidential election would have no “near-term” impact on US monetary policy.

Furthermore, the HKMA stated that the US rate-cut cycle was still in its early stages and that its decision to lower rates would not impact Hong Kong's financial and monetary stability. 

It also emphasised that the financial and monetary markets had continued to operate smoothly and in an orderly manner.

“Interest rates might still remain at relatively high levels for some time,” the HKMA added, urging a careful assessment and management of interest rate risk when making decisions related to property purchases, mortgages, or other borrowing.