HKMA reports a decrease in complex interest rates in February 2025.

HKMA (Hong Kong Monetary Authority) announced a reduction in composite interest rates as of the end of February 2025. The interest rate, the main indicator of banks’ average funds, fell from 2.16%last month to 7 Basis Points 2.09%. According to HKMA, this decrease is due to a decrease in weighting costs for deposits.

Influence of interest rate adjustment

Complex interest rates are the weighted average of liabilities that are sensitive to all Hong Kong dollars, including customer deposits and other debt products. This ratio affects borrowing and loan activities, so it is important to understand the cost structure of the banking sector. Reduction shows the potential easing of banks’ funding costs, which can affect Hong Kong’s loan interest rates and overall economic activities.

Historical context and calculation methodology

HKMA has traced the synthetic interest rate in the fourth quarter of 2003, allowing us to use the data in the past, which can be accessible through the monthly statistical bulletin board of HKMA’s official website. In particular, since June 2019, complex interest rates and weighted deposit fees have been calculated in accordance with the new region’s interest rate risk (IRRBB) framework.

A wider economic impact

Complex interest rate adjustment can have a broader economic impact, which can affect consumer borrowing costs and savings. Because the cost of funding is low, it can generally stimulate economic growth by encouraging loans and investments. However, it is necessary to take into account other factors such as hemp cost, which is part of the total loan cost structure, without applying operating costs, credit costs and complex interest rates.

For more details and data, stakeholders should refer to HKMA’s comprehensive reports and statistical bulletin boards available on websites.

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