Company: HBCYF
Filing Date: 2025-10-28
Form Type: 6-K
Source: 0001654954-25-012267
Chunk: 52

Company: HSBC HOLDINGS PLC
Filing Date: 2025-10-28
Form: 6-K
Chunk 52
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 2025, after it assessed tariff-related inflation risks as transitory but labour market risks as having increased. The target range for the Federal Funds rate is now 4%-4.25% with markets anticipating further cuts before the year-end. In the UK, the Bank of England has expressed increasing concern about the inflation outlook and has signalled its intention to pause further interest rate cuts over the remainder of 2025.

Although financial markets have priced in further interest rate cuts, there is uncertainty around their future trajectory. Policy rates could be raised if inflation were to accelerate significantly beyond central bank target ranges. Higher interest rates may reduce loan demand across key consumer and business segments, which could lead to a deterioration in credit quality and weigh on real estate and other asset prices. By contrast, lower interest rates could pressure net interest margins and adversely affect profitability.

Our risk profile may be influenced by fiscal policies, public deficits and levels of indebtedness. In several developed markets, government debt levels are rising due to rising social welfare costs and increased expenditure on defence and climate transition. A fragmented political landscape in many markets has diminished the political will for fiscal tightening. Rising long-term interest rates across major economies could adversely impact the fiscal capacity and debt sustainability of highly-indebted sovereigns. The rise in funding costs in our key markets could reduce the potential for GDP growth by raising the cost of borrowing while also creating refinancing risks for our customers and counterparties.

Exchange rate volatility may also affect our risk exposure through mark-to-market changes in trading positions and the translation effects of currency movements.

The geopolitical environment remains complex, and tensions could impact the Group's operations and risk profile. We continue to monitor the ongoing Russia-Ukraine war and developments in relation to the conflict in the Middle East, which remain key sources of uncertainty, and may impact HSBC and our customers, including through increased market volatility and supply chain disruptions. Heightened strategic competition between the US and China is also affecting the configuration of global supply chains, which may in turn affect the Group's operations.

Existing and additional sanctions, trade restrictions, counter-sanctions and other retaliatory measures relating to geopolitical tensions may adversely affect the Group, its customers and the markets in which the Group operates.

Commercial real estate conditions remain challenging in Hong Kong and mainland China. In Hong Kong, weak demand and over-supply of non-residential properties continued to put downward pressure on rental and capital values, despite an observed improvement in local sentiment, particularly in the residential market. In mainland China, government stimulus has yet to trigger a material improvement