The Monetary Authority of Macao (AMCM) raised the Base Rate of the Discount Window today (21 December 2018) by 25 basis points to 2.75%.   It has been the fourth time for the AMCM to raise the policy rate 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 19 December 2018 (US time).  The Hong Kong dollar is linked to the US dollar under a similar linked exchange rate system.

Since the third hike of the Base Rate in September this year, some banks have raised their prime lending rate as well as deposit interest rates at the retail level.  Meanwhile, money market rates have shown a relatively obvious uptrend recently.  In view of the expected movement of funding costs in the money market, the possibility of banks further adjusting interest rates at the retail level cannot be ruled out.     

The SAR Government would like to remind the public that the financial burden on borrowers will gradually increase alongside the up-cycle of interest rates.  Hence, the public should prudently assess their repayment abilities and act within their means before deciding to take out any loans.  Meanwhile, local banks should evaluate the impact of interest-rate adjustments on their operations and strengthen the management of potential risks.