The composite interest rate rose to 3% in March, from 2.93% in February, the Monetary Authority says. This followed a similar rise of seven basis points in February.

The seven basis-point increase in the average cost of funds in March mainly reflected the upward adjustment in short-term interbank rates, while savings deposit rates were unchanged.

The rise in short-term interbank rates was largely attributable to the initial public offering activities near the end of the month. Since US interest rates began increasing in mid-2004, the composite interest rate has increased 276 basis points, compared with the upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks in March.

Short-term interbank rates have continued to rise in early April due to another round of initial public offering activities.

The authority's Deputy Chief Executive Peter Pang said: "Until the temporary tight liquidity condition in the interbank market returns to normal following the completion of the current initial public offering activities activities, we may see the composite rate edging up further going forward."