HONG KONG, Sept 21 (AP) -- Hong Kong's central bank on Wednesday raised its base rate by 0.25 percentage points to 5.25 percent, matching the overnight interest rate hike by the U.S. Federal Reserve.

The Hong Kong Monetary Authority typically follows U.S. monetary policy because the local currency is pegged to the U.S. dollar.

However, it is up to individual banks whether to follow the central bank's move.

On Tuesday in the U.S., the Federal Reserve's policy-setting board raised its target for the federal funds rate to 3.75 percent from 3.50 percent.

The Hong Kong Monetary Authority has pledged to keep its base rate -- the reference rate for the lending of overnight funds to local banks through its discount window -- fixed at least 1.5 percentage points above the federal funds rate.

The U.S. central bank last increased rates in August, a move that its Hong Kong counterpart also matched.