Hong Kong Monetary Authority Chief Executive Joseph Yam on Saturday rejected ideas of using monetary means, or changing the Hong Kong currency linked exchange rate to the U.S. dollar, to ease inflation in the metropolis.

Talking on a radio program here on Saturday, Yam, head of Hong Kong de facto central bank, said using monetary means will not benefit the community as raising interest rates will lead to higher production costs and mortgage payment.

Noting the linked rate system should be assessed in a way which takes a number of economic cycles into account, Yam said U.S. dollar link in the past 25 years has brought more benefits than disadvantages.

"Hong Kong needs a stable monetary rate system," he said, stressing that the Financial Secretary's budget speech has already proposed various measures to help the underprivileged through financial means.

With the U.S. economic slowdown and its credit crisis unresolved, Hong Kong and the Chinese mainland's economy will be affected and the public should be psychologically prepared, he added.

He also said as the present investment environment is very volatile the Exchange Fund may show a negative result in the first quarter.

Yam noted banks have been issued with a guideline not to offer mortgages that do not require repayment for loan principal in the first few years in a bid to avoid the occurrence of subprime mortgage problem in Hong Kong.

(Xinhua News Agency April 6, 2008)