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H.K. banks cut interest rates by 0.5 percentage point.

HONG KONG, May 18 Kyodo

Individual banks in Hong Kong said Friday they will cut their prime lending rates by 50 basis points to 7.0% after the territory's banking cartels decided to trim the key savings deposit rate by the same margin.

Both reductions will be effective Monday.

The rate cuts follow the lowering of interest rates in the United States by the Federal Reserve this week.

It will be the fifth slash this year, amounting to an overall cut of 2.5 percentage points.

Hong Kong mirrors U.S. rate policy because the territory's currency is pegged to the U.S. dollar.

The Hong Kong Association of Banks decided Friday at its weekly meeting to decrease the key savings deposit rate to 2.25% from 2.75%.

The chairman of the local banking cartel, Peter Wong, expected there will be another 50 basis-point rate trim this year.

''The reduction of interest rate will be positive for the economy as a whole, the stock market as well as the property market,'' Wong told reporters.

But he anticipated that the positive impact will be seen six months later.

The Association of Banks' role in determining the savings deposit rate ceiling will be abolished in July when the final stage of rate deregulation is implemented, which will lift the remaining rate rules and allow individual banks to set their own rates on all types of deposits.
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Publication:Asian Economic News
Date:May 21, 2001
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