Inflation is the word on the lips of every investor right now. With the world’s economies reeling from the Covid-19 pandemic, broken supply chains, and the first major conflict on the European continent since 1945, prices of everything from grain to crude oil are skyrocketing.
In efforts to tamp down the runaway prices, the US Federal Reserve has started raising interest rates. Interest rates have surged by a total of 150 basis points since March and are forecast to rise to 3.25%–3.5%.
While higher interest rates are expected to negatively affect the earnings of most companies, banks stand to gain from a potentially bigger earnings margin as they lend at higher rates.