The Hong Kong Monetary Authority (HKMA) lowered its base rate, applied through the overnight discount window, by 50 basis points to 5.25% on Thursday, following a similar action by the US Federal Reserve.

Since Hong Kong's currency is closely tied to the Dollar, within a narrow range of 7.75-7.85 per Dollar, its monetary policy aligns closely with that of the US.

The HKMA said that the US rate cut would benefit the Asian financial hub's economy and could allow for some relief in local interest rates, Reuters reports.

“In Hong Kong, our financial and monetary markets have continued to operate in a smooth and orderly manner. Market liquidity condition has remained stable with the Hong Kong Dollar exchange rate hovering within the convertibility zone," said HKMA Acting Chief Executive Howard Lee.

“The rate cut cycle has just begun, interest rates will remain at relatively high level in the foreseeable future. The public should carefully assess and continue to manage the interest rate risk when making property purchase, mortgage or other lending decisions,” Lee continued.

Major banks in Hong Kong responded to the rate cut, with HSBC reducing its best lending rate by 25 basis points to 5.625%, effective 20th September. Whilst Bank of China (Hong Kong) also announced a cut in its Hong Kong prime rate, lowering it from 5.875% to 5.625%, effective 23rd September.

“Even though uncertainty about future US interest rates still exists, the direction is becoming clearer. Hong Kong interest rates are expected to ease accordingly and that will help support Hong Kong economic growth,” Hang Seng Bank's chief economist Thomas Shik commented.

On Wednesday, the Federal Reserve initiated a widely expected series of interest rate cuts, starting with a larger-than-normal reduction of half a percentage point. Policymakers anticipate an additional 50 basis points of cuts in 2024.

“Lower rates are intuitively positive for real estate but will have an uneven impact across Asia property markets and stocks,” said a Morgan Stanley research note, going on to add that declining mortgage rates would provide more support to Hong Kong than Singapore.