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How Rate Hikes Are Affecting Citigroup Stock and the Banking Sector

Robert Karr
How Rate Hikes Are Affecting Citigroup Stock and the Banking Sector

The Federal Reserve has indicated we could see two more rate hikes in 2018 after a 25-basis-point hike in the Fed funds rate in March 2018 to 1.8%. Rate hikes have helped banks (XLF) with higher net interest margins (or NIMs). However, the yield curve has flattened in recent months, suggesting we won’t see a major expansion in spreads going forward. Thus, rate hikes from here on will impact credit offtake as corporates could look to reduce leverage amid lower taxes and improving cash flows.