Chen Maobo: US interest rate cut broadly meets market expectations, Hong Kong interest rate adjustments may not necessarily follow suit

According to the Wise Finance APP, the Federal Reserve announced on the 18th that it would cut the federal funds rate target range by 50 basis points to a level between 4.75% and 5.00%. Hong Kong Financial Secretary Paul Chan stated that the direction of Hong Kong interest rates can be expected to move closer to the trend of US interest rates, but the speed and extent of interest rate adjustments in Hong Kong depend not only on US factors but also on local fund flows and market conditions, which may not necessarily follow in lockstep.

Chan mentioned that the Fed's rate cut generally met market expectations, with the market widely expecting it to be the beginning of a rate-cutting cycle. The Fed discussed cautiously, the local economic conditions are good, but there is a slowdown in job creation in the labor market, coupled with uncertainties such as the upcoming US elections and geopolitical factors, indicating that there are still many uncertainties.

After a two-day monetary policy meeting, the Fed also issued a statement stating that recent indicators indicate that US economic activity continues to expand steadily, job growth is slowing, the unemployment rate is rising but remains low. The inflation rate is further moving towards the 2% target, but is currently slightly higher. The Fed's confidence in inflation continuing to move towards the 2% target has strengthened, and it assesses that the risks to achieving full employment and inflation goals are broadly balanced. There is uncertainty in the economic outlook, and the Fed will continue to monitor the risks facing its dual mandate.

The economic forecast summary released by the Fed on the same day showed that compared to June of this year, the Fed lowered the median GDP growth rate expectation for this year by 0.1 percentage points to 2%, and lowered the median inflation expectation and core PCE price index by 0.2 percentage points to 2.6% for this year. In addition, the dot plot in the summary shows that Fed officials predict that the median federal funds rate will fall to 4.4% by the end of 2024 and to 3.4% by the end of 2025, implying that there will be multiple rate cuts in the future.

Chan reminded that Hong Kong needs to continue to be cautious and vigilant. He assessed that when US interest rates are lowered and Hong Kong interest rates are also lowered, it will benefit Hong Kong companies' operations and have a positive impact on the asset markets.

Chan stated that in addition to attending meetings, he will also engage in investment promotion work and visit companies, with the goal of attracting more mainland Chinese companies to Hong Kong, including tech companies, and promoting Hong Kong as a regional supply chain management center for expanding international markets