China remains a concern, either because short-term data has cast some doubt on the future growth trajectory or because of imbalances in some markets that still need to be corrected. Latin America lags behind in the recovery of its economies and some of them still require fiscal and monetary adjustments and, to a lesser extent, of their external sector. Recent political developments in Brazil could generate greater effects on the financial conditions facing the region. At home, inflation and activity have evolved in line with expectations, with no significant changes in prospects. The same is true of the labor market. However, after several years of slow growth, the risk remains that companies may need to further adjust their wage bills, especially if the expected recovery fails to occur, taking a toll on the wage mass and on expenditure. Conversely, both a stronger external impulse and improved expectations could prompt a stronger 5  reaction from investment, especially in a context where monetary policy has become more expansionary and both external and local financial conditions are good. In this context, the Board estimates that the risk balance is unbiased for both inflation and activity. Of course, this does not mean that we see no clouds on the horizon, but that the probability of occurrence is the same in one direction or the other. To the extent that these signal a change in the scenario going forward, the Bank will respond and adjust its decisions.
The committee is chaired by the Chief Executive of the HKMA and comprises members coming from multiple functions including monetary management, banking supervision, research and macro surveillance. 1/3  BIS central bankers' speeches  6. Some commentators have criticised the HKMA’s macroprudential measures as being ineffective because they have not been able to arrest the rising trend of property prices. This is a misunderstanding of the objective of the HKMA’s macroprudential measures. The objective of the HKMA’s measures is not to tame property prices. Instead, they are aimed at strengthening the risk management of banks and thus safeguarding long-term banking stability. In this regard, it is worth noting that the average LTV ratio of new residential mortgage loans has been consistently lower than 60% while the average debt servicing ratio of new mortgages has been consistently lower than 40%, suggesting that the banking system has built in buffer to safeguard its resilience. 7. Competition dynamics: Mortgage products in Hong Kong are homogeneous, in the sense that from the mortgagor’s perspective it makes little difference which bank is offering the mortgage facility. There is therefore a strong tendency for banks to compete for market share by lowering their underwriting standards. With the macroprudential measures in place, however, banks can compete for mortgage business only in terms of pricing (e.g. mortgage rate). Against a backdrop of rising property prices and a consistently low delinquency rate of mortgage loans, many banks tried to outcompete their peers by pushing down the mortgage rate to record low levels.