HONG KONG – The Hong Kong Monetary Authority on Thursday warned that high interest rates may “last for some time” because of US inflation which is, according to the US Federal Reserve, still “too high”.

The city’s de facto central bank kept its key interest rate unchanged, at 5.75 percent, for a sixth consecutive time in tandem with a similar Fed move.

READ MORE: Fed holds rates steady, flags 'lack of further progress' on inflation

Hours earlier, the Fed said, after its two-day meeting, that it had decided to keep the target range for the federal funds rate unchanged at 5.25-5.5 percent, signaling it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming.

The financial and monetary markets of Hong Kong continue to operate in a smooth and orderly manner.

Hong Kong Monetary Authority

Fed Chair Jerome Powell said US central bankers still believe the current policy rate is putting enough pressure on economic activity to bring inflation under control, and that they would be content to wait as long as needed for that to become apparent –  even if inflation is simply "moving sideways" in the meantime.

“The Fed’s future interest rate decisions will be dependent on incoming data, the evolving outlook and the balance of risks.  It has not yet gained enough confidence about the US inflation trajectory to start cutting interest rates,” the HKMA said in a statement reacting to the Fed decision.

The high interest rate environment may last for some time, it added.

“The financial and monetary markets of Hong Kong continue to operate in a smooth and orderly manner,” the HKMA said. It however warned that the Hong Kong dollar interbank rates might remain high for some time.

It urged the public to carefully assess and manage the relevant risks while making property purchases, mortgages, or other borrowing decisions.

ALSO READ: HKMA raises base rate to 5.75% after Fed hike

After the HKMA decision, HSBC Holdings announced the same day that it had kept its best lending rate in Hong Kong at 5.875 percent.

The city’s de facto central bank and the Fed have kept their key lending rates unchanged since last July, after increasing them 11 times since March 2022.

The HKMA has followed the Fed’s rate decision in lockstep since 1983 by design under its linked exchange rate system to preserve Hong Kong dollar’s peg to the US currency.