One such factor is how a new measure conforms to the current state of the economy and interplays with monetary policy. The suitably-large steps should preferably be taken in the right order. From this point of view I note that two proposed measures, longer fixed-rate periods and reduced tax deductions for interest payments, have opposite effects on how the repo rate affects household finances. Longer fixed-rate periods would weaken the impact of the repo rate while reduced deductions would strengthen its impact. If one worries that the households are myopic in their planning and that they will find it difficult to manage a return to normal interest-rate levels, it is probably appropriate to try to enforce longer fixed-rate periods now that interest rates are still low. If, on the other hand, one worries that the households have too easy access to inexpensive credit and in the near term wishes to see a greater gap between household and corporate interest rates, it is probably more appropriate to reduce the tax deductions. How to take the suitably-large steps in the right order is thus not self-evident, but my assessment is that it is now appropriate to strive for both longer fixed-rate periods and a phasing-out of the right to make tax deductions for the largest interest payments. However, most welcome from my monetary-policy perspective would be measures that lead to a more effective housing market, and in particular to increased housing construction.
So, the key to success for CDI clearly lies beyond technology. We need to find the right commercial incentive for all to benefit and create the network effect. 30. Similarly, for the mBridge project, technical interoperability is key but relatively straight forward. The platform now has the flexibility to allow central banks to easily connect through CBDCs or traditional payment systems. But that won’t attract more jurisdictions to join by itself. To do that, the platform needs to account for policy and business challenges. How to build-in different regulatory requirements like anti-money laundering, how to ensure sufficient on-chain foreign exchange liquidity, or how to develop a shared legal framework are all challenging but necessary tasks. The project team will focus on these issues, which are well beyond technology, in taking the project to its next stage. Closing 31. The HKMA began its fintech journey six years ago. We have come a long way, reached some important milestones, kept pace with our peers, and are now pressing on into uncharted territory. But like everyone else, we are still exploring, experimenting and learning. And as we continue our journey, we will stay radically open-minded, learn from our failures and keep trying, and go well beyond technology to achieve network effects. 32. As I said at the beginning, Hong Kong will continue on the road of fintech adoption. Many exciting developments are taking place, and you are bound to see interesting sights and meet interesting people on the way.