HK's Monetary Authority issues interest rate caution
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A "normalization" of monetary conditions may be on the horizon and urge people to manage interest-rate risks properly, Hong Kong's Monetary Authority Deputy Chief Executive Eddie Yue said Thursday.
In his insight column published on the authority's website, Yue said as interest rates are close to zero, they can only go up, although it cannot be predicted when it will happen and how fast they will rise.
He said there are signs there may not be further monetary easing in major economies like the U.S., the Eurozone and the UK. Faced with strong inflationary pressure, reflecting rising food and energy prices, several Asian economies have begun to raise interest rates to combat inflation.
The market expects there will be no more quantitative easing after the completion of the second round of quantitative easing later this year. According to the indicators which gauge market expectations for the policy interest rate in the U.S., market participants have advanced the expected timing of a hike since late last year.
According to Yue, that was the main reason the Monetary Authority introduced a series of prudential measures on residential mortgage loans and stepped up monitoring of fast growth in other types of loans as well.
The measures will help ensure banks are lending to borrowers who are able to withstand an eventual interest-rate rise. For the same reason, businesses and people should also manage the interest-rate risks properly and avoid overstretching themselves.
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