Description

As the U.S. Fed begins to increase the Federal Funds rate, interest rates in Hong Kong
 SAR will rise in tandem under the Currency Board system. While domestic economic
 activity in Hong Kong SAR remained resilient in previous rate hike cycles, there is a
 concern that the impact of higher interest rates would be larger this time due to
 historic high levels of leverage in both household and corporate sectors. However,
 macroprudential measures have contained the debt service burden among new borrowers
 and leverage quality of corporate sector is healthier than its peers in the region. Empirical
 estimations of aggregate consumption and corporate investment show that private
 domestic demand is likely to remain robust with the anticipated gradual increase in
 interest rates over the next few years and taking into account the buffers in the system.

More publications in this series: Working Papers

More publications by: Joong Shik Kang