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Analysed by components of the CPI(A), the increases in housing rentals, transport fares and charges for various consumer services continued to moderate in the third quarter from the early part of the year.
Even for clothing and footwear, which had a large import content and hence were affected more than the other items by rising world commodity prices and the earlier depreciation of the US dollar, their prices showed decelerated increase.
To a large extent, these carried the effects of easing in labour market conditions and softening in shop rentals, manifesting reduced domestically-generated inflationary pressures.
The financial sector
The market exchange rate of the Hong Kong dollar against the US dollar remained on the strong side of the link, moving within a narrow range of HK$7.73- 7.75 per US dollar and closed the third quarter at 7.732.
Following concerted intervention in the foreign exchange market by some central banks in late May and announcement of a balanced budget plan by the Clinton Administration in late June, market sentiment soon reversed and the US dollar began to stage a rebound against the Japanese Yen and the major European currencies.
Along with this, the trade-weighted Effective Exchange Rate Index of the Hong Kong dollar also rebounded, by 3.0% during the third quarter. This followed a 4.1% decline during the first half of the year.
On interest rates, the three-month HIBOR moved closely in line with its Euro- dollar counterpart.
At the end of September, it stood at 6.2%, 0.4 of a percentage point higher than the corresponding Euro-dollar deposit rate.
The bid and offer rates under the Liquidity Adjustment Facility of the Hong Kong Monetary Authority were maintained at 4.25% and 6.25% respectively during the third quarter.
Deposit rates administered by the Hong Kong Association of Banks and the best lending rates of the major banks were likewise kept unchanged, at 4.25% and 9.0% respectively during the third quarter.