PBOC Adjusted Yuan Exchange Rate and HKMA Lowered Interest Rate Following U.S. Fed's Rate Cut

Li Chen
18 Sep, 2025
Hong Kong

Benchmark stock indexes in China and Hong Kong hovered around the flatline following the U.S. Federal Reserve's rate decisions and economic projections. 

The Hang Seng index decreased 0.2%, and the mainland-focused CSI 300 index gained 0.3% after the Federal Reserve lowered its key lending rate range by 25 basis points to between 4.0% and 4.25%.

The central bank estimated as many as two rate cuts of 25 basis points by the end of the year but left unrevised its inflation and jobless rate outlook for 2025. 

The Fed delivered the widely anticipated 25-basis-point rate cut to support the rapidly deteriorating labor market; however, the immediate outlook for the economy remains uncertain.

Policymakers are struggling to keep inflation in check while supporting growth in the labor market, but the sharp escalation in import taxes is likely to keep it higher for longer.

The Hong Kong Monetary Authority lowered its interest rate by 25 basis points to 4.5%, matching the U.S. rate cut to preserve the HK dollar's peg to the U.S. dollar.

The new base rate is the lowest since December 2022. 

“A lower interest rate would reduce the burden of mortgage borrowers and companies, which will have a positive impact on Hong Kong’s economy and property market,” announced HKMA’s chief executive Eddie Yue Wai-man following the rate cut. 

After the Federal Reserve delivered its first rate cut of the year, the People's Bank of China adjusted its daily yuan rate to 7.1085 against the U.S. dollar, down from 7.1015 on Wednesday. 

 

China Indexes and Stocks 

The Hang Seng index decreased 0.2% to 26,867.65, and the mainland-focused CSI 300 index inched higher 0.3% to 4,565.65. 

Chipmakers advanced on optimism that large Chinese companies are more likely to use homegrown advanced chips for their artificial intelligence applications. 

SMIC advanced 5.6% to HK$71.80, Alibaba Group Holding increased 0.3% to HK$161.80, and Baidu Inc. gained 4.3% to HK$136.30.