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FRIDAY, SEPTEMBER 14, 1984
THE GROWING STRENGTH OF THE US DOLLAR OVER THE PAST FIVE MONTHS WAS DUE MAINLY TO HIGH US DOLLAR INTEREST RATES AND EVER REMOTER EXPECTATIONS OF ANY IMMEDIATE FALL, GIVEN THE PERSISTENT US BUDGET DEFICIT AND THE UNEXPECTEDLY STRONG PERFORMANCE OF THE US ECONOMY.
SIR JOHN SAID THAT THERE WAS THUS A SUBSTANTIAL SWITCHING OUT OF THE HONG KONG UNIT BY DEPOSITORS IN THE SECOND QUARTER OF THE YEAR, WITH THE RESULT THAT BETWEEN MID-MARCH AND EARLY AUGUST, MARKET INTEREST RATES TENDED TO RISE AND HONG KONG DOLLAR DEPOSIT RATES WERE REVISED UPWARDS ON SIX OCCASIONS.
THE ADMINISTERED RATES AFTER THE TWO REDUCTIONS IN AUGUST ARE NOW SIMILAR TO THOSE PREVAILING AT THE END OF LAST DECEMBER, HE NOTED.
+ I AM WELL AWARE OF THE BURDEN OF HIGH INTEREST RATES ON INVESTMENT INTENTIONS AND ON COMPANIES WITH LARGE DEBTS, AND OF THE IR ADVERSE EFFECTS ON THE LONG-TERM DEVELOPMENT OF THE ECONOMY.
+EQUALLY, HOWEVER, WE CANNOT EXPECT THAT SAVERS AND OTHER DEPOSITORS WILL NECESSARILY BE WILLING TO HOLD HONG KONG DOLLARS UNLESS LOCAL DEPOSIT RATES OFFER A REASONABLE RETURN AND ARE SUFFICIENTLY COMPETITIVE WITH RATES OVERSEAS, PARTICULARLY IN THE UNITED STATES.
+ IF WE WANT A STABLE EXCHANGE RATE, AND WE DO, WE ALSO HAVE TO STOMACH THE CONSEQUENCES FOR INTEREST RATES,+ HE SAID.
ON THE OVERALL EMPLOYMENT SITUATION, HE POINTED OUT THAT IN THE THREE MONTHS TO JULY THIS YEAR, THE SEASONALLY ADJUSTED UNEMPLOYMENT RATE WAS 3.4 PER CENT AND THE UNDEREMPLOYMENT RATE WAS 0.9 PER CENT, SUGGESTING EFFECTIVELY FULL EMPLOYMENT.
+I THUS EXPECT THAT OUR LABOUR FORCE WILL BENEFIT, AS THEY SHOULD, FROM THE EXPORT-LED ECONOMIC RECOVERY AND THE IR HARD WORK, HE ADDED.
ALTHOUGH THE CONSUMER PRICE INDEX (A) IN THE FIRST SEVEN MONTHS OF THIS YEAR ROSE ON AVERAGE BY 10 PER CENT OVER LAST YEAR'S CORRESPONDING PERIOD, THE RATE OF INCREASE HAS SLOWED DOWN SINCE JANUARY WHEN IT WAS 12.4 PER CENT.
+THIS MODERATION IN THE RATE OF INFLATION INDICATES THAT THE ADVERSE EFFECT ON IMPORT PRICES OF THE SHARP DEPRECIATION OF THE HONG KONG DOLLAR UP TO SEPTEMBER 1983 HAS WORKED THROUGH COMPLETELY TO THE RETAIL LEVEL, WITH CONTINUING STABILITY IN THE EXCHANGE RATE. I BELIEVE THAT THE RATE OF INFLATION WILL EASE FURTHER IN THE COMING MONTHS,+ SIR JOHN SAID.
WHILE BELIEVING