Record of discussion of meeting of Exchange Fund Advisory Committee Currency Board Sub-Committee held on January 12, 2026
The following is issued on behalf of the Hong Kong Monetary Authority:
(Approved for Issue by the Exchange Fund Advisory Committee on February 4, 2026)
Report on Currency Board Operations (October 9 – December 29, 2025)
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The Currency Board Sub-Committee (Sub-Committee) noted that the Hong Kong dollar (HKD) traded within a range of 7.7673 – 7.7900 against the US dollar (USD) during the review period. The HKD strengthened in mid-October, supported by demand for dividend payments and continued net inflows from the Southbound Stock Connect, and eased in mid-November amid softened interest rates before firming towards the year-end on seasonal demand. While HKD interbank rates (HIBORs) generally tracked their USD counterparts under the Linked Exchange Rate System, they were also influenced by the local supply and demand of HKD funding. HIBORs generally eased during October and November, driven by equity-related demand, before firming again towards the year-end on seasonal factors. Meanwhile, with the decrease in the target range for the US federal funds rate in Q4, many banks reduced their Best Lending Rates by 12.5 basis points in early November and did not further cut the rates in December, with the Best Lending Rates in the market ranging from 5.000 per cent – 5.500per cent at the end of the review period. The Convertibility Undertakings were not triggered and the Aggregate Balance was stable at around HK$54 billion. No abnormality was noted in the usage of the Discount Window. Overall, the HKD exchange and interbank markets continued to trade in a smooth and orderly manner.
The Sub-Committee noted that the Monetary Base increased to HK$2,040.65 billion at the end of the review period. In accordance with the Currency Board principles, all changes in the Monetary Base had been fully matched by changes in foreign reserves.
The Report on Currency Board Operations for the review period is atAnnex.
Monitoring of Risks and Vulnerabilities
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The Sub-Committee noted that in the US, while the trade truce and government reopening eased market jitters, the economy continued to face challenges stemming from a "K-shaped" consumption divergence, concerns over the sustainability of the artificial intelligence (AI) boom, and a weakening labour market. In Asia, while export diversification and the AI boom had so far supported economic growth, lingering trade policy uncertainty and potentially large propagation effects of the US trans-shipment tariffs continued to pose headwinds for the region's economic outlook.
The Sub-Committee noted that in the Chinese Mainland, economic growth moderated in October and November 2025. However, the recent China-US trade truce should help ease the downward pressures on China's near-term exports and real GDP growth. In the face of a profoundly complex environment, China would build a modern industrial system, enhance technological self-reliance, and boost consumption in the 15th Five-Year Plan period (2026-2030).
The Sub-Committee noted that in Hong Kong, the economy continued to grow in Q4 2025, underpinned by solid growth in merchandise exports and further stabilisation in retail sales. Looking ahead, the Hong Kong economy was projected to grow at a moderate pace in 2026, supported by ongoing demand for tech products and improved business sentiment amid eased trade tensions and interest rate cuts. Meanwhile, the housing market recovered further alongside easing financial conditions, whereas the commercial real estate markets continued to face challenges of high vacancy rates.
Outlook for Hong Kong's Financial and Monetary Conditions
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The Sub-Committee noted a paper that examined global economic outlook and monetary policy environment, and the implications for Hong Kong's financial and monetary conditions.
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