XN000022-1994-04-27 — Page 21

7

WEDNESDAY, APRIL 27, 1994

BEEN

SINCE THAT TIME A SERIES OF MONETARY REFORM MEASURES HAS INTRODUCED TO STRENGTHEN THE SYSTEM AND OUR ABILITY TO ENSURE EXCHANGE

THAT THESE STABILITY.

MEASURES HAVE BERN SUCCESSFUL IS

RATE

UNSHAKEN INCLUDING THE

BY THE FACT THAT THE EXCHANGE RATE HAS REMAINED ILLUSTRATED DESPITE AN ABUNDANCE OF EVENTS IN THE PAST FEW YEARS, STOCK MARKET CRASH IN 1987, THE EVENTS IN CHINA IN JUNE 1989, THE GULF WAR IN 1990, THE BCCI AFFAIR IN 1991 AND SO ON.

OF

то

HAS RATES, TO THE

OF

WITHIN ITS MONETARY ARMOURY, THE MA NEEDS TO HAVE THE MEANS RELATIVE INFLUENCING THE INTEREST RATES OF THE HONG KONG DOLLAR,

MAINTENANCE THOSE OF THE U.S. DOLLAR, IN A WAY THAT IS HELPFUL TO THE OF EXCHANGE RATE STABILITY. IT IS TRUE, AS THE CONSUMER COUNCIL

THAT ARGUED,

THE ABILITY TO INFLUENCE

INTERBANK WHOLESALE RATHER THAN RETAIL DEPOSIT RATES, IS MORE DIRECTLY RELEVANT PURPOSE OF EXCHANGE RATE STABILITY. HOWEVER, THE DIFFERENT TYPES INTEREST RATES ARE IN PRACTICE INTER-RELATED. IN MONETARY OPERATIONS,

BE THEREFORE,

FOR THE MONETARY AUTHORITY IT IS PRUDENT

IF NOT POSITION

EFFECTIVE INFLUENCE OVER A WIDE, то EXERCISE WHOLE, SPECTRUM OF INTEREST RATES INCLUDING THOSE ON RETAIL IN SHORT, AN EXTENSIVE RANGE OF MONETARY WEAPONS IS ALWAYS TO A RESTRICTIVE.ONE.

THE INTEREST

TO

IN A THE

DEPOSITS. PREFERABLE

ARMOURY RATE RULES ARE PART OF THE MONETARY PROVIDE AN EFFECTIVE MECHANISM

FOR

SETTING

AT

INTEREST SUCH RATES AFFECT ΤΟ FOR THE UNDOUBTEDLY

THE MA

THEY PRESENT. RATES FOR THE RETAIL DEPOSITS THEY ARE DESIGNED TO COVER. MAY IN TURN INFLUENCE WHOLESALE INTEREST RATES OR MAY DIRECTLY

THIS LED THE DESIRE TO HOLD HONG KONG DOLLAR BALANCES, CONCLUDE THAT WHILE THE INTEREST RATE RULES ARE NOT CRUCIAL PURPOSE OF MAINTAINING EXCHANGE RATE STABILITY, THEY ARE RELEVANT AND HELPFUL FOR THAT PURPOSE.

THUS, THE MA HAS EXPRESSED A

PREFERENCE FOR

THAT HELPFUL THE INTEREST OF

ELEMENT IN IT'S MONETARY ARMOURY TO BE RETAINED IN MAINTAINING EXCHANGE RATE STABILITY.

-

CONSERVATIVE,

AND

TO CONCLUDE INTEREST RATE

I IT WOULD

SHOULD

SOME HAVE SAID THAT THE MA IS BEING OVERLY PERHAPS EVEN UNDULY MODEST IN ITS ABILITY TO DEFEND THE EXCHANGE RATE. BUT EVEN IF THE GOVERNMENT WERE, IN THE FINAL ANALYSIS, THAT THE MA COULD STILL DO A RELIABLE JOB WITHOUT THE RULES

A CONCLUSION WHICH AS PART OF ITS MONETARY ARMOURY STRESS THAT IT HAS NOT YET REACHED AND MIGHT NOT REACH STILL BE NECESSARY TO FORM A VIEW ON THE OTHER STABILITY ISSUE WHICH I

OF THE NAMELY, WHETHER THE SOUNDNESS MENTIONED EARLIER

WERE SYSTEM COULD BE UNDERMINED IF THE INTEREST RATE RULES ABOLISHED.

TO WHICH THE MA,

IN IT'S

ROLE AS

BANKING ΤΟ BR

BANKING

THIS IS SOMETHING SUPERVISOR, IS PAYING SERIOUS ATTENTION. AGAIN, I MUST STRESS THAT IT HAS NOT YET MADE UP ITS MIND, BUT CERTAIN OBSERVATIONS CAN BE MADE THIS STAGE.

AT

/THE EFFECT