Hong Kong holds its base rate at 4.25%, tracking the Fed

What happened. On 29 October the HKMA, Hong Kong's monetary authority, kept its base rate at 4.25%. That is the rate at which the HKMA lends to banks overnight, and other rates in the city build on it. The decision came hours after the Fed kept its federal funds target range at 3.75% to 4%.

Why Hong Kong follows the Fed. The Hong Kong dollar is pegged to the US dollar and trades in a band of 7.75 to 7.85 per dollar. To keep the peg working, Hong Kong rates move with US rates. Unlike most central banks, the city does not set its own independent rate.

What the regulator said. The HKMA says the Fed decision was in line with market expectations and that Hong Kong markets are working in an orderly way. The gap between HKD and USD rates is noticeable. That makes it attractive to borrow in HKD and invest in USD, a so called carry trade. As a result the Hong Kong dollar may ease gradually. But the currency and interbank rates also depend on how much risk the market wants to take with such trades, and on demand for HKD, which share listings and seasonal factors affect.

Where the currency is. Reuters had the Hong Kong dollar at 7.8452 per US dollar. That is close to the weak edge of the band at 7.85.

What next. The HKMA says future Fed moves are very uncertain and will depend on inflation, the job market and other data. They may change the rate environment in Hong Kong. The regulator asks anyone taking a mortgage, a loan or investing to keep interest rate risk in mind. This is a summary of the decision, not advice.

Confirmed facts

• On 29 October 2026 the HKMA left its base rate unchanged at 4.25%, following the Fed's decision to hold.^[2]
• The Fed kept the target range for the federal funds rate at 3.75% to 4%; the HKMA says the decision was in line with market expectations.^[1]
• The Hong Kong dollar is pegged to the US dollar in a 7.75 to 7.85 band, so the city's monetary policy moves in lockstep with the US.^[2]
• HKMA: as the noticeable HKD-USD interest rate gap persists, carry trades may cause the Hong Kong dollar to ease gradually.^[1]
• The Hong Kong dollar was last at 7.8452 per US dollar, according to Reuters.^[2]
• The HKMA asks the public to manage interest rate risk carefully when buying property, investing or borrowing.^[1]

Implications

• Our readingLoan rates in Hong Kong stay where they are for now, since the base rate did not change.
• Our readingWhile HKD rates stay below USD rates, the currency may keep leaning toward the weak edge at 7.85.
• ConfirmedThe next rate change in Hong Kong will depend on the Fed.

Still unknown

• When the Fed will move next, and in which direction.
• Whether the HKMA will need to defend the peg at 7.85.
• How HIBOR interbank rates will move in the coming weeks.

Who it affects

Hong Kong, China, United States, Asia. People who live, borrow or do business in Hong Kong, and anyone following the Hong Kong dollar and Asian rates

Sources

1. Hong Kong Monetary Authority: HKMA's Response to US Fed's Interest Rate Decision October 28, 2026 · official
2. Reuters: Hong Kong Monetary Authority leaves interest rates unchanged, tracking Fed move October 29, 2026 · media