and then to 8 3/4% on 9th November. In the interval between these two last moves the effective exchange rate index had recovered to 94.3 (but only in response to President Carter's
measures to defend the U.S. dollar) and the September money supply figures, which had just been published, were a cause
for concern.
28.
Thus, in the past 6 months, the Best Lending Rate has been increased by 84% and many bank customers will now be
paying rates of 10-11% and even higher. Whether lending rates will have to be raised again in the near future remains to be seen, but I expect to see over the next few months, a dampening down of the demand for loans and thereby a slowing down of the growth rate of the money supply; and, in due time, I have no doubt that the exchange value of the Hong Kong dollar will
strengthen. At the same time, there will be a helpful reduction in the spending power of those with outstanding loans (14). I would hope, in particular, that the demand for loans for property development and for speculative property purchases will be dampened down with a beneficial effect on the rate at which prices are presently increasing.
29.
Deposit rates have also been increased. To the extent that the consequential narrowing of the differential
(14) Although the practice in respect of many mortgage loans for
flats is for the repayment period to be extended when the interest rate is adjusted upwards.
16
/between
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