Standard Chartered expects the US to cut interest rates by half a percentage point this week to initiate a rate-reduction cycle that will last into next year, a move that is set to shore up investor sentiment in Hong Kong and other markets, according to a senior executive.

Weak employment data, coupled with a decline in consumption and inflation rates, was likely to prompt the US Federal Reserve to implement its first rate cut of the year, said John Thang, head of markets and strategic client management and solutions for Hong Kong, Greater China and North Asia, on Friday.

Thang predicted that the Fed would reduce its key rate by 50 basis points at the year's sixth Federal Open Market Committee meeting this Wednesday, bringing the target range down to between 3.75 per cent and 4 per cent. That would mark the US central bank's first rate adjustment since December, following five consecutive meetings without changes.

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About 96 per cent of traders expected a 25-basis-point cut by the Fed on September 17, while the remaining 4 per cent anticipated a 50-basis-point cut, according to data from the CME Group's FedWatch tool on Friday.

The Federal Reserve is widely expected to reduce rates for the first time this year. Photo: Reuters alt=The Federal Reserve is widely expected to reduce rates for the first time this year. Photo: Reuters>

"The weak economic data would mean the US may cut the rate by 50 basis points in September to boost the economy," Thang said.

He expected the US to continue to lower its key rate next year by an additional 75 basis points to a full percentage point. The one-month Hong Kong interbank offered rate, or Hibor, which is used for pricing mortgage loans, was projected to decrease from the current level of over 3 per cent to around 2 per cent to 2.5 per cent.

"A lower interest rate would definitely benefit the investment markets and the overall economy in Hong Kong in the coming year," Thang said. "The strong stock market turnover and active initial public offerings in Hong Kong this year will also encourage more investors to go into the market."

Last week, Swiss private bank Lombard Odier projected that the US would cut interest rates six times from September through the end of 2026, resulting in increased capital flows into emerging markets and benefiting Chinese stocks and bonds in the years to come.

Hong Kong's financial sector is booming, driven by a 30 per cent surge in the benchmark Hang Seng stock index this year, making it one of the world's top performers. The city also regained its position as the world's largest initial public offering market in the first eight months of this year, according to data from the London Stock Exchange Group.

Standard Chartered was expected to benefit from this trend after seeing strong growth in its foreign currency and fixed-income trading during the first half of the year, Thang said. He believed that investors would spread their portfolios across a wide range of products, including bonds, stocks, foreign currencies and digital assets.

"The trade war is not yet settled, and there are still a lot of uncertainties in the global markets," he said. "Companies and individual investors would like to adopt a diversification strategy. This is why we would like to launch different investment products to meet their investment needs."

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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