When prices rise, where does the lost purchasing power go?
Hong Kong CPI rose 1.65% in the year to 2026-07 while HK-dollar M2 reached HK$9,283.6 billion. This note explains which side of the balance sheet gains, and why Hong Kong is the market where we can only answer half the question.
Prices rise, so cash buys less each year. The follow-up question is where the lost purchasing power goes. This note works through the arithmetic, and is explicit about the part of the answer Hong Kong data does not yet allow.
Which two sides does a price increase act on?
Nominal principal does not move with prices. A HK$1 million deposit and a HK$1 million loan are both still HK$1 million after prices rise 1.65%, but their meaning changes at the same time: the deposit buys less, and the loan is lighter relative to income.
So lost purchasing power is not destroyed. It is a change in the relationship between holders of nominal assets and holders of nominal debt. Which side you are on depends on your cash and deposits minus your borrowing, not on either figure alone.
Census and Statistics Department; BIS long consumer prices · HKMA · Monthly Statistical Bulletin
What the Hong Kong figures show
Hong Kong CPI, year-on-year change to 2026-07 (Census and Statistics Department; BIS, 2010=100)
What the Hong Kong figures show
- HK-dollar M2
- Value
- HK$9,283.6 billion
- Observation
- 2026-06
- Basis
- End-month, not seasonally adjusted
- M2 multiple
- Value
- 1.574×
- Observation
- 2016-06 → 2026-06
- Basis
- Same series both ends
- CPI multiple
- Value
- 1.194×
- Observation
- 2016-06 → 2026-06
- Basis
- Same series both ends
- Household debt
- Value
- not held
- Observation
- —
- Basis
- No verified series in our data
Selected entries from the table below. Its dates, units, definitions and limitations still apply.
| Series | Value | Observation | Basis |
|---|---|---|---|
| HK-dollar M2 | HK$9,283.6 billion | 2026-06 | End-month, not seasonally adjusted |
| CPI, year-on-year | 1.65% | 2026-07 | Headline, not seasonally adjusted |
| M2 multiple | 1.574× | 2016-06 → 2026-06 | Same series both ends |
| CPI multiple | 1.194× | 2016-06 → 2026-06 | Same series both ends |
| Government debt | not held | — | No verified series in our data |
| Household debt | not held | — | No verified series in our data |
The last two rows are the point. In other markets this note puts a number on the debtor side, because an official debt table exists in our data. For Hong Kong it does not, so the quantity that would complete the calculation is missing. We state the gap rather than substitute an estimate.
What the gap between M2 and CPI does and does not say
From 2016-06 to 2026-06, HK-dollar M2 multiplied 1.574 times while CPI multiplied 1.194 times. The difference cannot be read as an amount that flowed into asset markets, and the two multiples cannot be subtracted into a single “true inflation” figure. M2 measures the stock of a monetary aggregate; CPI measures the price of a defined consumption basket.
Limits of this calculation. The M2 series begins after April 1997 on the current definition and includes foreign-currency swap deposits, so it is not a continuous long history. CPI is a national series linked and rebased by the BIS. The two multiples use different end months (2026-06 for M2, 2026-07 for CPI) because publication dates differ. No debtor-side figure is available, so the total transfer implied by a price increase is not computed for Hong Kong.
How to use this
Start from your own net position: cash and deposits minus borrowing. Then choose the basis that matches your question. For the cost of a consumption basket, CPI is the closer reference. For the share an amount represents of a monetary aggregate, use the M2 ratio. The two give different answers because they measure different things.
Under the Linked Exchange Rate System the HKMA maintains convertibility between 7.75 and 7.85 HKD per USD, and the monthly average was 7.8425 in 2026-08. One practical consequence is that Hong Kong monetary conditions follow the anchor currency, so local price outcomes are not the target they are set against. This site does not forecast prices or recommend assets.
Questions & answers
If my deposits lose purchasing power, who receives it?
There is no single recipient. A price increase lowers the real value of nominal assets and the real burden of nominal debt by the same proportion, so depositors and borrowers are affected in opposite directions. It is an accounting relationship, not a payment to anyone.
Why does this note not give a Hong Kong government debt figure?
Because CapsWindow has not yet obtained a verified Hong Kong public or household debt series. Publishing a number we cannot trace to an official table would break the site's sourcing rule, so the gap is left visible.
Does the currency peg change the answer?
It changes where the conditions come from, not the arithmetic. Under the Linked Exchange Rate System the HKMA maintains convertibility between 7.75 and 7.85 HKD per USD, and the monthly average rate was 7.8425 in 2026-08. Hong Kong monetary conditions therefore track the anchor currency rather than being set for local inflation.