Core Viewpoint - The Federal Reserve has lowered interest rates by 0.25% as expected, while three issuing banks have also reduced their prime rates by 0.125%. The market's expectation for further rate cuts in December has cooled, indicating uncertainty in future interest rate trends [1][2]. Group 1: Interest Rate Changes - The Federal Reserve's decision to cut rates aligns with market expectations, impacting the prime rates of local banks [1]. - The adjustment of the prime rate is a commercial decision by individual banks, influenced by their funding costs and business strategies [2]. Group 2: Economic Outlook - Positive signals from the recent meeting between the leaders of China and the U.S. suggest a potential signing of a trade agreement, which may alleviate market uncertainties and inflation pressures, supporting a more accommodative monetary policy [1]. - The Hong Kong banking system's liquidity has tightened, with interbank liquidity falling to approximately HKD 54 billion, leading to expectations of narrow fluctuations in the Hong Kong Interbank Offered Rate (HIBOR) [1]. - The average daily trading volume in Hong Kong's stock market has exceeded HKD 250 billion this year, indicating improved investor sentiment and a projected economic growth of 2% to 3% for Hong Kong, in line with government forecasts [1]. Group 3: Future Projections - HIBOR is expected to follow the downward trend of U.S. interest rates, which will benefit corporate clients by reducing their funding costs [2]. - The interest rate differential between Hong Kong and the U.S. is anticipated to narrow gradually, which is favorable for Hong Kong's economic development [1].

Group 1 - The Hong Kong Monetary Authority (HKMA) stated that the future pace and magnitude of interest rate cuts by the US Federal Reserve are highly uncertain, which will lead to changes in the Hong Kong interest rate environment [1][3] - Following strong capital inflows in early May, the supply of Hong Kong dollars remained ample, but demand for the currency has decreased, leading to a weakening of the Hong Kong dollar due to carry trades [1][3] - The HKMA noted that the interest rate differential between Hong Kong and the US remains attractive for carry trades, keeping the exchange rate close to the 7.85 HKD to 1 USD level, although recent demand for Hong Kong dollars related to stocks has provided some support for the currency [1][3] Group 2 - The HKMA indicated that the "weak-side convertibility guarantee" was triggered multiple times since late June, with the most recent occurrence on July 31 during the New York trading session [1][3] - The HKMA will buy Hong Kong dollars and sell US dollars according to the linked exchange rate system if the "weak-side convertibility guarantee" is triggered again, which will lead to a decrease in the banking system's surplus and a gradual increase in Hong Kong dollar interbank rates [1][3] - On the same day, three banks in Hong Kong, including HSBC, Standard Chartered Bank (Hong Kong), and Bank of China (Hong Kong), announced that they would maintain their best lending rates unchanged [1][3]

Core Viewpoint - The Hong Kong Monetary Authority (HKMA) has demonstrated the orderly operation of the linked exchange rate system amid changing market liquidity and persistent interest rate differentials between Hong Kong and the U.S. [1][2] Group 1: Market Dynamics - The HKMA President noted that the Hong Kong dollar (HKD) has seen a significant inflow of funds, with the banking system's HKD surplus rising from approximately HKD 45 billion to over HKD 170 billion, indicating a very ample liquidity situation [1] - The demand for HKD has changed, with a strong demand observed from May to June, but factors such as the peak of dividend payouts and the return of funds from non-local companies have reduced this demand [1] Group 2: Interest Rate and Exchange Rate - The interest rate differential between Hong Kong and the U.S. remains wide, making arbitrage trading profitable and keeping the HKD close to the 7.85 level [2] - The HKMA emphasizes that the primary policy goal of the linked exchange rate system is to maintain the stability of the HKD, rather than targeting interest rates [2]

Core Viewpoint - The liquidity of the Hong Kong dollar has become very abundant in the short term, leading to a significant decrease in interbank short-term interest rates [1] Group 1: Interest Rate Dynamics - The changes in interest rates reflect normal market behavior under the linked exchange rate system and are beneficial for the current economic environment in Hong Kong [1] - The widening interest rate differential between Hong Kong and the US increases the incentive for dollar carry trades, causing the Hong Kong dollar to weaken from 7.75 to 7.82 against the US dollar since early May [1] Group 2: Future Outlook - If the supply of funds continues to exceed demand, the market forces from carry trades may weaken the Hong Kong dollar, leading to a potential rise in Hong Kong interbank interest rates, possibly approaching US interest rate levels [1] - The duration and intensity of this process remain highly uncertain [1]