Yesterday the Monetary Authority of Macao (AMCM) raised the discount window base rate by 25 basis points to 2.25 percent. According to a statement issued yesterday by the AMCM, since the Macau pataca is linked to the Hong Kong dollar, “The movements of policy rates in Hong Kong and Macau should be […] consistent, in order to maintain the effective operation of the linked exchange rate system.”
As a result, the AMCM followed its Hong Kong counterpart in raising the base rate by 25 basis points. The US Federal Reserve also raised the federal funds rate target range by 25 basis points on 13 June (US time). The Hong Kong dollar is linked to the US dollar under a similar linked exchange rate system.
Local interest rates have broadly increased since the base rate was raised 25 basis points to 2 percent on 22 March this year. The AMCM expects that Macau banks would gradually adjust deposit and lending rates at the retail level, along with developments in the financial market and funding costs.
The statement notes, “The gradual upward adjustment of mortgage interest rates would increase mortgagors’ financial burden; hence, those who rely on mortgages to purchase properties should prudently assess their ability to repay.” The AMCM says that borrowers of other types of loans should also pay attention to the financial risk associated with rising interest rates and conduct relevant cost analyses and cash flow planning. Meanwhile, local banks should assess the impact of interest rate adjustments on operations and strengthen risk management.