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.