# Hong Kong Monetary Authority (HKMA): Meaning and Responsibilities

![Hong Kong Monetary Authority (HKMA)](https://www.investopedia.com/thmb/k9b9maQmCOTh4hytgiUFNbEvYRo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/hong-kong-monetary-authority-hkma.asp-final-b552fa565124477784d3851971943636.png)

*The HKMA responsible for maintaining the stability of the Hong Kong dollar and the banking system. — Investopedia / Laura Porter*

> **Definition**
>
> The Hong Kong Monetary Authority (HKMA) was established to manage the monetary policy for a financial system that is separate from China's.

## What Is the Hong Kong Monetary Authority (HKMA)?

Founded in 1993, the Hong Kong Monetary Authority (HKMA) is an independent entity with four primary functions:

*   It maintains the stability of the Hong Kong dollar (HKD) according to the Linked Exchange Rate System.
*   It maintains the stability and integrity of Hong Kong's banking and financial systems.
*   It promotes Hong Kong's reputation as a global financial center.
*   It manages the country's Exchange Fund.

The HKMA acts to control [inflation](https://www.investopedia.com/terms/i/inflation.asp) and maintain the soundness of the banking sector through its [monetary policy](https://www.investopedia.com/terms/m/monetarypolicy.asp). It pegs the HKD to the United States dollar to help the HKD maintain a stable value.

### Key Takeaways

*   The HKMA was established in 1993, before the 1997 handover of Hong Kong from British rule to the People's Republic of China.
*   As Hong Kong's central bank, the HKMA makes monetary policy decisions to control inflation and maintain the stability of the banking system and national currency.
*   The Exchange Fund is Hong Kong's sovereign fund; it's managed to ensure monetary system stability, financial security through capital preservation and growth, and control of investment risk.
*   In June 2025, the HKMA maintained its benchmark interest rate at 4.75%.  
    

## Understanding the HKMA

Hong Kong is a key finance capital internationally and is recognized as an important destination for offices of multinational companies.   

As a [Special Administrative Region](https://www.investopedia.com/terms/s/special-administrative-region.asp) of the People's Republic of China, Hong Kong is an autonomous territory with its own currency and an annual [nominal GDP](https://www.investopedia.com/terms/n/nominalgdp.asp) of more than $407 billion, as of 2024. The HKMA acts as a de facto [central bank](https://www.investopedia.com/terms/c/centralbank.asp) for the region. 

As noted above, among its responsibilities, the HKMA manages the Hong Kong Monetary Authority Exchange Fund, the country's [sovereign wealth fund](https://www.investopedia.com/terms/s/sovereign_wealth_fund.asp).

The Exchange Fund's primary portfolios are the Backing Portfolio, which invests in high-quality and liquid U.S. securities to support the monetary base, and the Investment Portfolio, which invests in bonds and equities for capital preservation and appreciation.

A third portfolio, the Long-Term Growth Portfolio, invests in private equity and real estate to manage risk through diversification and to enhance overall returns. A fourth focus, the Strategic Portfolio, was established to hold only shares in Hong Kong Exchanges and Clearing Limited for what the HKMA calls "strategic purposes."

The HKMA is a member of the Executives' Meeting of East Asia-Pacific Central Banks, which is an organization of central banks and monetary authorities in the region that supports cooperation among their economies. Its 10 other members are:

*   Reserve Bank of Australia
*   People's Bank of China
*   Bank of Japan
*   Bank of Indonesia
*   Bank of Korea
*   Bank Negara Malaysia
*   Reserve Bank of New Zealand
*   Bangko Sentral ng Pilipinas
*   Monetary Authority of Singapore
*   Bank of Thailand

## HKMA's Currency Stability Role

One of the primary roles of the HKMA is maintaining currency stability. The [Linked Exchange Rate](https://www.investopedia.com/terms/l/linked-exchangerate-system.asp) System is designed to stabilize the exchange rate between the HKD and the USD.  

This [fixed-rate exchange system](https://www.investopedia.com/terms/f/fixedexchangerate.asp) seeks to maintain [parity](https://www.investopedia.com/terms/p/parityprice.asp) with the USD within a tight range, allowing HKD note-issuing banks to issue new banknotes only when they deposit an equivalent value of U.S. dollars with the authority.

Furthermore, the HKMA maintains the stability and integrity of the country's financial system by buying HKD to maintain parity with the dollar within the stated range.

In addition, by its management of the Exchange Fund, the HKMA attempts to manage the value of Hong Kong's currency.

### Interest Rates

In June 2025, the HKMA kept its key interest rate at 4.75%, in step with the U.S. Federal Reserve's determination to maintain the 4.25% - 4.5% federal funds rate range. Both central banks remain cautious about the potential for inflation due to unknowns relating to the second Trump administration's tariff policies.

> **Article Sources**
>
> 1.  Hong Kong Monetary Authority. "[The HKMA](https://www.hkma.gov.hk/eng/about-us/the-hkma/)."
>     
> 2.  Federal Reserve Bank of St. Louis. "[Gross Domestic Product for Hong Kong](https://fred.stlouisfed.org/series/MKTGDPHKA646NWDB)."
>     
> 3.  Hong Kong Monetary Authority. "[Portfolio Segregation](https://www.hkma.gov.hk/eng/key-functions/reserves-management/investment-management/portfolio-segregation/)."
>     
> 4.  EMEAP. "[Home](https://www.emeap.org/)."
>     
> 5.  Hong Kong Monetary Authority. "[How Does the LERS Work?](https://www.hkma.gov.hk/eng/key-functions/money/linked-exchange-rate-system/how-does-the-lers-work/)"
>     
> 6.  Trading Economics. "[Hong Kong Interest Rate](https://tradingeconomics.com/hong-kong/interest-rate)."