The Zhitong Finance App learned that the Federal Reserve kept the federal funds rate unchanged at 3.75% to 4% as expected by the market. On the Hong Kong side, both HSBC Bank and Bank of China Hong Kong announced that they will keep their Best Preferential Interest Rate (P) unchanged at 5%, and other banks are expected to follow suit. Wang Meifeng, managing director of Central Plains Mortgage, pointed out that the suspension of interest rate hikes in October after the US interest rate hike in September was expected by the market. Keeping interest rates unchanged at this meeting is beneficial to observe lagging inflation and economic data.
She said that under the investment expansion momentum of enterprises led by artificial intelligence, the US economic growth momentum is increasing, and the inflation rate is still under sticky rebound pressure, which means that the possibility of raising interest rates in December has been preserved. The market expects the US to have another chance to raise interest rates by 0.25% at the last December interest rate meeting this year to strengthen the control of inflation.
Wang Meifeng pointed out that the interest rate statement mentioned that more information should be accumulated to determine appropriate policies, and emphasized that decisions depend on the latest data in the future. If the US raises interest rates in December, it is not expected to raise interest rates continuously in January to gain more time to observe the lagging effects and effects of interest rate adjustments. Interest rate regulation for the first quarter of next year depends on inflation and the development of economic data. It is expected that after the first quarter of next year, US interest rates will generally enter a period of rampant observation, and future interest rates in the medium to long term will fall after inflation stabilizes.
She said that the Hong Kong dollar interest rate split in October gradually fell back to the level before the US interest rate hike in September, making the Hong Kong dollar interest rate lower than 1% below the US interest rate, reflecting that the pressure on banks' capital costs is still moderate. Coupled with the ideal growth in bank deposits this year, the Hong Kong dollar loan-to-deposit ratio has been at a low level in 17 years (the HKD loan-to-deposit ratio fell to 69.3% at the end of August). Currently, the bank deposit base is huge and resilient to interest rate adjustments.
Wang Meifeng expects that the US interest rate may be raised by another 0.25% in December to deal with the risk of inflation. The cumulative increase in September will add up to half a percent increase. Whether the Bank of Hong Kong will follow P at that time is expected to depend on factors such as the rising trend of the Hong Kong dollar interest rate and changes in the bank's comprehensive capital costs. The probability of adding P or not will each account for half.
Banks may raise the best interest rate P due to rising capital costs. The increase is expected to be between 0.125% and 0.25%. However, based on the resilience of banks to changes in interest rates in the past, the best interest rate in Hong Kong may remain unchanged during the year when the bank deposit base is large and the increase in capital costs is still moderate.
Wang Meifeng believes that regardless of whether P is added during the year, it is not necessarily the focus. What is more noteworthy is that if interest rates change slightly, the H interest rate is expected to remain above 3% in the market this year.
In terms of property prices, Wang Meifeng pointed out that in September, the US restarted interest rate hikes in response to inflation, and the Bank of Hong Kong kept interest rates unchanged, and the market's expectations that there would still be a chance to raise interest rates moderately during the year have gradually been digested. It is expected that local interest rates will not change much. Currently, interest rate factors have little impact on the property market.
Although property prices rose strongly in the first half of the year and entered a digestion period in the second half of the year, so that buyers turned conservative in price pursuit, and many tug-of-war with owners caused second-hand transactions to get stuck, first-hand marketing kept the sales situation ideal. Based on the improvement of fundamental factors in the property market, the high level of rent has led to continued strong demand from the public to rent to buy and collect rent. Coupled with the positive economic growth of Hong Kong, it supports the continued positive development of the property market.