The Hong Kong Monetary Authority on Thursday reduced its base interest rate charged via the overnight discount window by 25 basis points to 4.50 percent, tracking a widely anticipated move by the US Federal Reserve.

This is the first cut in nine months since the HKMA lowered the rate by 25 basis points on Dec 19 last year.

The special administrative region’s monetary policy aligns closely with that of the United States, as the city's currency is pegged to the US dollar within a tight range of 7.75-7.85 per dollar.

The base rate is the interest rate forming the foundation upon which the discount rates for repurchase transactions through the discount window are computed.

“The base rate is currently set at either 50 basis points above the lower end of the prevailing target range for the US federal funds rate or the average of the five-day moving averages of the overnight and one-month Hong Kong Interbank Offered Rates (HIBORs), whichever is the higher,” the HKMA said in a statement on Thursday morning.

HKMA Chief Executive Eddie Yue Wai-man said on Thursday the reduction will have a positive impact on the city's property market and economy, noting that financial and monetary markets continue to operate in a smooth and orderly manner.

The Fed might cut rates further by 50 basis points before the end of the year, Yue said, adding that "the extent and pace of future US interest rate cuts are subject to uncertainty".

Some analysts in Hong Kong however said the scope for downward adjustment in local prime rates can be limited, given the already low interest rate environment and lenders in the city may not fully align their prime rate cuts with Fed easing.

READ MORE: Looming US rate cut may boost HK financial markets

Saying that a US rate cut could support home prices and stimulate transactions in Hong Kong’s housing market, Roen Yeung Ming-yee, senior associate director at Centaline Property Agency's research department, said recently: “Home prices are expected to gradually edge higher after stabilizing, as the local market is widely anticipating a US rate-cutting cycle. Transaction volumes are also likely to pick up.”

While lowering their benchmark interest rate by a quarter percentage point on Wednesday, Fed officials penciled in two more cuts within this year following months of intense pressure from the White House to slash borrowing costs.

The Federal Open Market Committee voted 11-1 to cut the target range for the federal funds rate to 4 percent-4.25 percent, after holding rates steady for five straight meetings this year.

ALSO READ: US Fed lowers interest rates, signals more cuts ahead

Speaking at a press conference after the rate cut decision, Fed Chair Jerome Powell, long criticized by President Donald Trump for not cutting interest rates faster, pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation.

With inputs from Reuters