3
WEDNESDAY, MAY 10, 1989
REMAINS
'WHILE THE LABOUR MARKET
TIGHT, WITH THE CURRENT UNEMPLOYMENT RATE AT AROUND 1.3 PER CENT, THE PROPERTY MARKET HAS SHOWN SOME SIGNS OF CONSOLIDATION, FOLLOWING THE UPSURGE
IN PROPERTY PRICES AND RENTALS OVER THE PAST YEAR OR SO.
"THE RECENT INCREASES IN INTEREST RATES ARE ALSO HAVE SOME EFFECT.
BRGINNING TO
PRESSURE ON
"THE SLOWER GROWTH IN TRADE, COUPLED WITH THE COSTS, SHOULD IN DUE COURSE RESTRAIN DOMESTIC DEMAND, HE SAID.
MR JACOBS SAID THE RATE OF INCREASE IN THE CONSUMER PRICE INDEX (A) FOR THE FIRST QUARTER AS A WHOLE OVER A YEAR EARLIER WAS 9.8 PER CENT, COMPARING WITH THE CORRESPONDING INCREASES OF 8.1 PER CENT IN THE THIRD QUARTER AND 7.9 PER CENT IN THE FOURTH QUARTER OF LAST YEAR.
FORECAST OF
HE SAID SOME MEMBERS MIGHT HAVE TAKEN THE BUDGET THE RATE OF INCREASE OF 8.5 PER CENT FOR 1989 AS A WHOLE IN THE CPI (A) TO BE CONSERVATIVE BECAUSE OF THIS INCREASE IN INFLATION.
"THAT MAY OR MAY NOT BE SO," MR JACOBS SAID, "BUT THERE 15 IN MY VIEW NO CASE FOR CHANGING MY BUDGET STRATEGY OR. AS YET,
FOR
REVISING MY FORECASTS.
"INDEED, A SLOWER ADJUSTMENT ADDS FORCE TO MY DECISION то RUN A SIGNIFICANT BUDGET SURPLUS THIS FINANCIAL YEAR.'
+T
HIGH,
TURNING TO INTEREST RATES, WHICH HAD REMAINED RELATIVELY MR JACOBS NOTED THAT IN FACT OVER THE PAST THREE MONTHS HONG KONG DOLLAR RATES IN THE INTERBANK MARKET HAD BEEN KEPT ABOVE THE CORRESPONDING U.S. DOLLAR RATES WITHIN THE CONSTRAINT OF MAINTAINING EXCHANGE RATE STABILITY.
"THIS IS HELPFUL IN RELATION TO INFLATION SINCE IT PROVIDES AN INCENTIVE FOR BORROWERS AND OTHERS TO LIMIT THEIR SPENDING.
"IN ADDITION, THE EXCHANGE RATE OF THE U.S. DOLLAR HAS BEEN FIRMING UP SINCE DECEMBER 1987.
"THIS HAS RESULTED IN AN INCREASE OF OVER TWO PER CENT IN THE EFFECTIVE EXCHANGE RATE OF THE HONG KONG DOLLAR BETWEEN THE END OF 1987 AND THE END OF APRIL THIS YEAR.
"BY LIMITING THE SCOPE FOR INCREASES IN IMPORT PRICES THIS HAS BEEN OF SOME HELP IN RESTRAINING INFLATION.
"THUS, OVER THE PAST 16 MONTHS AT LEAST, CONTRARY TO WHAT SOME HAVE ARGUED, THE LINK WITH THE U.8. DOLLAR HAS NOT CONTRIBUTED TO INFLATION, HE SAID.
REFERRING TO SOME MEMBERS' CONCERN REGARDING FORECASTS OF ECONOMIC GROWTH, THE FINANCIAL FORECASTING IN A VOLATILE SITUATION WAS NEVER EASY.
THE GOVERNMENT'S
SECRETARY SAID
HE SAID ............