Macao and Hong Kong followed the US Federal Reserve’s lead by slashing their individual interest rates to 5.25 percent this morning, a drop of 50 basis points, multiple media outlets report.
Macao’s decision to lower its interest rate following Hong Kong’s announcement is not surprising, as the local currency, the pataca, is pegged to the Hong Kong dollar. The latter is in turn linked to the US dollar, meaning that interest rates in the two SARs mostly move in tandem with that of the US Federal Reserve Bank.
Local officials hope the move will lower financial pressure on borrowers, as well as help promote economic growth.
[See more: Macao and Hong Kong are linking their bond markets]
Washington’s decision to slash the interest rate by 0.5 percentage points to a range between 4.75 to 5.0 percent was its first cut in four years and is expected to have far reaching effects not only on the US’s economy, but also those of other countries and territories.
Michael Madowitz, an economist with the Roosevelt Institute, was reported by the Washington Post as saying that that cut would be beneficial for the middle class and that “lower rates should bring billions more in long-term investments off the sidelines, and create thousands more long-term jobs.”
Other countries such as China, the UK, Canada, and New Zealand have also enacted similar fiscal measures in recent times to stimulate their economies.
