Hong Kong watchdog urges caution after U.S. Fed votes to taper

The Hong Kong Monetary Authority (HKMA) on Thursday urged vigilance against potential market risks after the U.S. Federal Reserve announced a plan to taper its asset purchases later this month.

"Due to uncertainty on the U.S. inflation and interest rate outlook, the public should stay vigilant as regards potential market volatilities and risks," the HKMA said in a short response to a key meeting of the Federal Open Market Committee, the Fed's policy-making committee on Wednesday local time.

The announcement of tapering came as U.S. inflation rates remained elevated in recent months. In the 12 months through September, the core personal consumption expenditure price index, the Fed's preferred inflation measure, rose 3.6 percent for a fourth straight month, remaining at the highest level since May 1991, according to the U.S. Commerce Department.

While highlighting caution, the HKMA offered assurances that Hong Kong's money markets continue to operate smoothly, with ample liquidity in its banking system, and Hong Kong dollar exchange rate and interest rates remain steady.

The watchdog vows to continue to monitor market developments and maintain monetary and financial stability in accordance with the Linked Exchange Rate System, which pegs the exchange rate of the Hong Kong dollar to the U.S. dollar.