The Monetary Authority of Macao (AMCM) raised the Base Rate of the Discount Window today (27 September 2018) by 25 basis points to 2.5%.   It has been the third time for the AMCM to raise the policy rate so far this year.      

As the pataca is linked to the Hong Kong dollar, the movements of policy rates in Hong Kong and Macao should be basically consistent in order to maintain the effective operation of the linked exchange rate system.  As a result, the AMCM followed its Hong Kong counterpart to raise the Base Rate by 25 basis points, after the policy action by the US Federal Reserve to raise the Fed funds rate target range by 25 basis points on 26 September (US time).  The Hong Kong dollar is linked to the US dollar under a similar linked exchange rate system. 

The uptrend of local money-market interest rates has become more obvious since the Base Rate was upwardly adjusted twice with a total of 50 basis points in the first half of 2018.  In response to the development of the financial market and the expected movement of funding costs, the interest rates of certain types of deposits have risen recently.  It is expected that Macao banks would gradually adjust various interest rates at the retail level, including lending rates.      

The SAR Government would like to reiterate that future hikes in lending rates would directly increase borrowers’ financial burden, especially on mortgage loans with relatively large denominations.  Hence, the public should prudently assess their repayment abilities and act within their means before deciding to take out any loans.  Concurrently, local banks should assess the impact of interest-rate adjustments on their operations and strengthen the management of potential risks.