HONG KONG () -The Hong Kong Monetary Authority (HKMA) on Thursday cut its base interest rate charged via the overnight discount window by 25 basis points to 4.75%, tracking a move by the U.S. Federal Reserve.

Major Hong Kong banks followed with reductions, but some at a smaller magnitude. HSBC cut its Hong Kong dollar best lending rate by 12.5 basis points to 5.25% and Bank of China (Hong Kong) lowered its Hong Kong dollar prime rate to 5.25% from 5.375%.

“The future path of rates remains highly uncertain going into 2025,” HSBC’s Hong Kong CEO Luanne Lim said in a statement.

“HSBC has decided to lower its Hong Kong dollar deposit and lending rates following another US rates cut, bringing a cumulative reduction of 62.5 basis points since this September,” she added.

Hong Kong’s monetary policy moves in lock-step with the United States as the city’s currency is pegged to the greenback in a tight range of 7.75-7.85 per dollar.

The Fed lowered its policy rate by a quarter of a percentage point, a decision Federal Reserve Chair Jerome Powell described as a “closer call,” and said a slower pace of projected rate cuts next year reflected higher inflation readings in 2024.

“The pace of (U.S.) interest rate cuts remains uncertain as it is dependent on U.S. inflation and labour market data developments, and economic activity may also be influenced by fiscal, economic and trade policies,” HKMA Chief Executive Eddie Yue told reporters.

Yue said Hong Kong interest rates could remain at relatively high levels for some time, and the extent and pace of future interest rate cuts was subject to considerable uncertainty. The public should manage interest rate risk when making property purchases, mortgage or borrowing decisions, he added.

Hong Kong’s financial and monetary markets continue to operate in a smooth and orderly manner, while market liquidity conditions remain stable and the Hong Kong dollar exchange rate is steady, HKMA said.