Macau raises key rate to 4.25% after Fed hike

Macau raised its key interest rate by 25 basis points last weel, following the U.S. Federal Reserve’s first rate increase since 2023, as the city’s currency peg to the Hong Kong dollar keeps its monetary policy closely aligned with Hong Kong and U.S. rates.

The Monetary Authority of Macao (AMCM) raised its discount window rate – the rate at which banks can obtain short-term liquidity from the monetary authority – by 25 basis points to 4.25%, effective immediately, according to a statement. The move followed a corresponding increase by the Hong Kong Monetary Authority (HKMA) after the Federal Reserve raised its benchmark rate.

The AMCM said the increase was necessary because the pataca is pegged to the Hong Kong dollar, meaning “the interest rate in Macau is consistent with the interest rate in Hong Kong.”

The AMCM’s decision came less than half an hour after the HKMA announced an increase in its benchmark rate following the Fed’s move. The Hong Kong dollar is pegged to the U.S. dollar.

The Fed unanimously raised its policy rate by 25 basis points to a range of 3.75% to 4% last Wednesday, following a two-day meeting. It was the central bank’s first rate increase since July 2023.

The Fed’s latest projections point to another rate increase this year, with the median projection for the federal funds rate at 4.1% at the end of 2026, compared with the current midpoint of 3.875%.

The rate increase comes as Macau’s non-performing loans have declined from a record MOP57.8 billion reached in June 2025.

According to official AMCM data, overdue loans fell for the third consecutive month to MOP46 billion at the end of July.

Overdue credit represented 4.4% of Macau banks’ loans in July. The ratio was 4.7% for loans to borrowers outside Macau.

Even so, the percentage of overdue bank credit in Macau remains far below the record of 25.3% reached in mid-2001, during the global downturn that followed the bursting of the dot-com bubble.

The European Banking Authority, the EU’s banking regulator, uses a 5% gross non-performing loan ratio as a threshold for banks to develop a strategy for managing non-performing exposures. The threshold is a supervisory trigger rather than an assessment that a bank has reached an inherently unsafe level of loans.