(Corrects name of bank to Bank of East Asia in 8th paragraph)
* Rate hike comes amid uncertain time for HK's economy
* Rising property prices, slowing retail and tourism sectors
* IMF expects growth in Hong Kong to rise to 1.9 percent
HONG KONG, Dec 15 The Hong Kong Monetary
Authority on Thursday raised the base rate charged through its
overnight discount window by 25 basis points to 1 percentage
The move from Hong Kong's de facto central bank followed the
U.S. Federal Reserve's decision to raise the benchmark federal
funds rate to a range of 0.50 percent and 0.75 percent on
Hong Kong tracks U.S. rate moves as its currency is pegged
to the U.S. dollars.
The monetary authority sets its base rate through a formula
that is 50 basis points above the prevailing U.S. Fed Funds
Target or the average of the five-day moving averages of the
overnight and one-month HIBORs. (Hong Kong Inter-bank Offered
While Hong Kong has successfully weathered previous U.S.
rate hikes, the latest increase comes at an increasingly
uncertain time for the city as it grapples with a slowing
Chinese economy, a struggling retail and tourism sector and
soaring property prices.
Norman Chan, chief executive of Hong Kong's monetary
authority told local media on Thursday there remained
uncertainty in the pace of normalisation of U.S. interest rates.
"The inflation rate of Hong Kong currency could be affected
by the amount of capital outflow, the development of the
international market and other related factors."
Paul Tang, chief economist at Bank of East Asia said the
impact would be most noticable on the local property market
which has been buoyed by a low interest rate and limited other
channels for investment.
The IMF said in a report last month it expects growth in
Hong Kong to rise to 1.9 percent next year from an estimated 1.5
percent this year but cautioned against stretched property
valuations and stresses from exposure in mainland China.
Hong Kong's housing prices, which are among the most
expensive in the world, had cooled since late 2015 but in the
second half of this year returned back to near previous highs.
Should interest rates rise faster than expected the IMF said
"there is a risk to the real economy from an adverse spiral of
negative wealth effects, lower collateral values, slower credit
growth, and weaker household and corporate spending."
(Reporting by Farah Master, Joyce Leung, Katy Wong and Gabriel
Yiu; Editing by Michael Perry and Simon Cameron-Moore)