Banks in Hong Kong are due to increase prime rates for the first time in four years following the Federal Reserve’s aggressive policy tightening stance.

Bloomberg polled 12 economists, all who forecast that prime rates will increase in 2022 by as much as 100 basis points.

The Hibor one-month interbank rate rose for the seventh consecutive session to surpass 1% for the first time since June 2020.

The mounting borrowing costs fuels challenges for Hong Kong’s property developers, already dealing with residents departing and the economic hit from the Covid crisis. Rising interest rates is considered one of the principal factors of falling property prices in Hong Kong, with Goldman Sachs citing a 20% decline in value in four years.

The Hong Kong Monetary Authority is forecast to increase its base rate to echo a predicted 75-basis point rise by the Fed next week. Hong Kong imports its monetary policy from the U.S. thanks to a linked exchange rate with the Dollar.

Moreover, nine of the 12 economists surveyed by Bloomberg predict house prices to register a year-on-year fall by the end of the year. Half forecast the city’s prime rate to increase by 25 basis points, whilst four expect a 50-basis point hike. The other two economists predict a 75-basis-points to 100-basis-point rise.

“As the liquidity continues to drain, the most likely scenario is Hong Kong banks will need to adjust to the turn of the global monetary tide as early as the fourth quarter,” stated Gary Ng, senior economist at Natixis SA. “Hong Kong may not be able to defy the rate hike pressure as it did in 2016-2018 unless there is a quick reversal of market sentiment,” he added.

At the time of writing, the Hong Kong Dollar stood at 7.8494 per Dollar, close to the weaker end of the 7.75-to-7.85 permitted trading range.