The Hong Kong Monetary Authority left its base rate unchanged at 4.25 percent on Thursday after the US Federal Reserve kept interest rates steady less than a week ahead of the 2026 US midterm elections.

The HKMA said that the Fed’s decision to keep the target range for the federal funds rate unchanged at 3.75-4 percent is in line with market expectations.

The statement released after the Fed meeting indicated that economic activity was expanding at a strong pace and the labor market was stable, but inflation has remained elevated, the HKMA said. This reflects that the Fed is watchful over the outlook on inflation, though it may need more time to observe how the data evolves, it added.

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“US interest rate adjustments are subject to considerable uncertainty, and will depend on developments in inflation, labor market, and other economic data, and may influence the interest rate environment in Hong Kong,” reads an HKMA statement issued on Thursday morning.

It cautioned the public to carefully manage interest rate risks while making decisions about property purchase, investment or borrowing.

As the noticeable HKD-USD interest rate differential persists, carry trade activities may cause the Hong Kong dollar to gradually ease, the HKMA said.

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“That said, the outlook for the Hong Kong dollar and interbank rates can vary due to various factors, such as the market's risk appetite for carry trades, and the supply-demand conditions for Hong Kong dollars which are in turn influenced by capital market activities and other seasonal factors,” it added.

The city’s currency is pegged the greenback in a tight range of 7.75 to 7.85 per dollar. The Hong Kong dollar was last at 7.8452 per US dollar.

With inputs from agencies