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The composite interest rate fell to 2.98% at the end of July, from 3.09% at the end of June, the Monetary Authority says.
The 11-basis-point drop in the average cost of funds was mainly attributed to an easing of the previously tight liquidity conditions in the interbank market, following the completion of a series of initial public offerings during the month, the authority's Deputy Chief Executive Peter Pang said.
However, liquidity conditions appear to have tightened again in the early part of August, partly due to rising volatilities in global financial markets, he added. It is expected that the composite interest rate will continue to be influenced by short-term changes in liquidity conditions.
In July interbank rates fell across-the-board by nine to 30 basis points, while savings deposit rates were unchanged. Since US interest rates began rising in the middle of 2004, the composite interest rate has grown 274 basis points, compared with upward adjustments of between 275 basis points and 300 basis points in the best lending rates of banks by the end of July.
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