Measures of trend inflation in Hong Kong

The search for an appropriate measure of inflation has been an important task for central banks around the world, particularly those with an inflation targeting framework. Given that the principal monetary policy objective of the Hong Kong Monetary Authority (HKMA) is to maintain exchange rate stability under the Linked Exchange Rate system, there is little room for conducting discretionary monetary policy in Hong Kong. Nevertheless, any significant changes in the trend movement in general prices have significant policy implications for Hong Kong, which should be closely monitored by policymakers. In particular, the trend price indicator provides useful information about the extent of macroeconomic and financial imbalances, which are important for guiding prudential supervisory policies.