Hong Kong Holds 4.25% Rate After Fed Pause

Hong Kong’s Monetary Authority kept its base rate at 4.25% after the U.S. Federal Reserve held its federal funds rate target at 3.75% to 4%, as expected. Because the Hong Kong dollar is pegged to the U.S. dollar, the city’s monetary policy closely follows U.S. rate decisions. The HKMA said markets remain orderly but warned that the sizable interest-rate gap could encourage carry trades that gradually weaken the Hong Kong dollar. It added that future U.S. rate moves—and their effects on Hong Kong rates and currency markets—remain uncertain and depend on inflation, labor-market conditions, and other economic data.