Hong Kong Cuts Base Rate to 3.5 Percent, Tracking Fed (Update1)

May 2 (Bloomberg) -- The Hong Kong Monetary Authority cut its base rate to 3.5 percent after the Federal Reserve lowered its benchmark by a quarter of a percentage point to 2 percent. The move matched the Fed's, cutting its base rate by 25 basis points from 3.75 percent, Joseph Yam, chief executive of the city's de facto central bank told reporters in Hong Kong today. ``In Hong Kong, there is limited room for deposit rates to go down further, and this will affect lending rates too as banks try to maintain the spread,'' Yam said. The Federal Reserve on April 30 reduced the benchmark U.S. interest rate and indicated it's ready to pause after seven cuts since September. Hong Kong's currency is pegged to the U.S. dollar, which typically means the city's monetary policy follows that of the Fed. ``The U.S. economy is quite weak and the housing market there is the key,'' Yam added. ``Energy and commodity prices are affecting inflation expectations.''