| Abstract | The third and most recent reduction in United States (US) federal-funds rate was delivered in rapid succession to the first two -- making a total of 75 basis points in less than two months. Although the anticipated fall in interest rates is undoubtedly positive to Hong Kong's domestic demand, the continuing fall in local inflation as a result of cost adjustment has seen a sharp rise in the real interest rate recently. Hong Kong's economic outlook will continue to hinge on external developments. With a lower interest rate trend established in the USA and other major industrial economies, it is hoped that global demand could be sustained as a result. Hong Kong will then be able to benefit from the improvement in its external sector, as this is a more crucial factor in determining the eventual recovery of the Special Administrative Region (SAR)'s economy. |
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