Monetary Authority Chief Executive Joseph Yam disagrees with using monetary means, or changing the linked exchange rate, to ease inflation.

On a radio programme today Mr Yam said using monetary means will not benefit the community as raising interest rates will lead to higher production costs and mortgage payment.

Noting the linked rate system should be assessed in a way which takes a number of economic cycles into account, he said US dollar link in the past 25 years has brought more benefits than disadvantages. He added Hong Kong needs a stable monetary rate system.

Mr Yam said the Financial Secretary's budget speech has already proposed various measures to help the underprivileged through financial means.

With the US economic slowdown and its credit crisis unresovled, Hong Kong and the Mainland's economy will be affected and the public should be psychologically prepared, he added.

He also said as the present investment environment is very volatile the Exchange Fund may show a negative result in the first quarter.

Mr Yam noted banks have been issued with a guideline not to offer mortgages that do not require repayment for loan principal in the first few years. This is to avoid the occurrence of subprime mortgage problem in Hong Kong.