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

HONG KONG, April 20 Kyodo

Individual banks in Hong Kong said Friday they will cut their prime lending rates by 0.5 percentage point to 7.5% after a decision by the territory's banking cartel to trim the key savings deposit rate by the same margin.

Both reductions will be effective from Monday.

The rate cuts, mirroring the surprise lowering of interest rates in the United States by the Federal Reserve on Wednesday, will be the fourth this year. The four rate cuts have resulted in an overall reduction of 2 percentage points.

Hong Kong follows 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 2.75% from 3.25%.

The chairman of the local banking cartel, Peter Wong, told reporters that the rate cut will have a positive impact on Hong Kong's stock market and for people with mortgages.

Wong expected a further 0.5-point rate cut within the year.

The bank association's role in determining the savings deposit rate ceiling will be abolished in July, when the final stage of rate deregulation is implemented, lifting 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:Apr 23, 2001
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