The Hong Kong Monetary Authority lifted borrowing costs to mirror the interest rate trajectory of the US Federal Reserve. A widening interest rate differential with the US could trigger carry trades that push the local currency toward the weaker side of its exchange rate band, the agency's chief executive warned.

This increase is the first for the city since 2023 and aims to maintain the currency's stability against the dollar. The decision could threaten a property recovery that has been unfolding since last year, as higher rates typically increase the cost of mortgages and reduce buyer demand.