The composite interest rate fell from 3.16% in June to 3.11% in July, the Monetary Authority says. This followed a fall of 23 basis points in the composite interest rate in June.

The drop in the average cost of funds in July was primarily attributable to the fall in time deposits and interbank rates, reflecting the ample liquidity in the banking system.

During the month, banks' savings deposit rates remained unchanged, but average time deposit rates fell moderately while the Hong Kong Interbank Offered Rates dropped by 24 to 32 basis points for funds with maturity of overnight to 12 months.

The composite interest rate has grown by 287 basis points since the current up-cycle of US interest rates started in mid-2004. Hong Kong banks' best lending rates have risen between 300 and 325 basis points.

Composite interest rate data from the end of the fourth quarter of 2003 to the end of July 2006 is available here. The composite interest rate at the end of August will be released on September 19.