Is Hyperinflation coming to Hong Kong?

What’s good for the USA financially could spell ruin for Hong Kong.

The U.S. Federal Reserve's vow to keep interest rates low into late 2014 could bring about the risk of hyperinflation in Hong Kong, said Jaspal Bindra, Standard Chartered Plc's chief executive officer for Asia.

A currency peg to the dollar means Hong Kong won't be able to raise benchmark borrowing costs as China's expansion stimulates growth and price gains, Bindra said.

"It will have a very profound impact in Hong Kong," he said. "If you have near-zero interest rates when their inflation is at over 6 or 7 percent given the China effect, and their growth is, also thanks to China, at 6 or 7 percent, you're looking for hyperinflation."

Hong Kong consumer prices rose 5.7% in December from a year earlier on higher food and rental costs. Without distortions caused by temporary government subsidies, the rate was 6.4%, a record high since 2007.

Hyperinflation is inflation that is very high or out of control and can be defined as inflation exceeding 50% a month. The International Accounting Standards Board, however, defines hyperinflation as a cumulative inflation rate over three years approaching 100%.

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