The Hong Kong Monetary Authority reduced its Base Rate by 25 basis points to 4.50% on 18 September 2025, executing an automatic adjustment that tracked the United States Federal Reserve's decision to cut its own policy rate by an identical margin the previous day. The move was made in accordance with the territory's Linked Exchange Rate System, which anchors the Hong Kong dollar to its US counterpart and links the HKMA's Base Rate to US rates through a pre-set formula.
The HKMA confirmed the change in a statement published on its website, noting that the Base Rate had been set at 4.5% with immediate effect according to its pre-set formula.
MECHANICS OF THE LINKED EXCHANGE RATE SYSTEM
The Linked Exchange Rate System keeps the local currency within a trading band of HKD 7.75 to HKD 7.85 per US dollar. Under this arrangement, the HKMA does not formulate independent monetary policy; instead, its Base Rate is set at 50 basis points above the lower end of the Federal Reserve's target range or at the average of the five-day moving averages of overnight and one-month HIBOR, whichever is higher.
PRIME RATE CUTS
Commercial banks in Hong Kong are not automatically obliged to pass the Base Rate reduction through to their prime lending rates, but the three note-issuing banks moved immediately: HSBC and Bank of China (Hong Kong) cut their prime rates by 12.5 basis points to 5.125%, and Standard Chartered by 12.5 basis points to 5.375%, their first prime-rate cuts since December 2024.