MACAO -- The base rate of the discount window in Macao is raised by 25 basis points to 1.75 percent, the monetary watch dog of the special administrative region (SAR) said on Thursday, which is the fifth time to raise the policy rate since December 2015.

The Monetary Authority of Macao (AMCM) said that as the pataca is linked to the Hong Kong dollar, the movements of policy rates in Hong Kong and Macao should be basically consistent in order to maintain the linked exchange rate system between the two SARs.

As a result, the AMCM raised the Base Rate by 25 basis points following the Hong Kong Monetary Authority.

AMCM added that since the Hong Kong dollar is linked to the US dollar under the linked exchange rate system, the rate hike of Hong Kong was attributed to the decision of the US Federal Reserve to raise the Fed funds rate target range by 25 basis points on Dec 13.

In recent months, money market rates in Macao have been trending up and pataca liquidity has been contracting. The pressure of local banks to raise interest rates at the retail level has been accumulating owing to rising fund costs in the money market.

AMCM said the possibility of uplifting loan and deposit interest rates by Macao banks cannot be ruled out in the foreseeable future. Individual banks would adjust their retail interest rates according to their commercial decision.

The watchdog also said the SAR government would remind the public to be alerted to the potentially enlarging volatility of the real estate market, assess prudentially their financial positions, especially the additional burden on mortgage payments due to rising interest rates.