<p>Major banks will not <em>necessarily</em> benefit from a rise in the federal funds rate. One way major banks make money is from the difference between the interest rates they borrow at and the rates they lend at (their net interest margin). If interest rates, including the Federal Fund rate, increase, major banks benefit if the difference between the rates increases.</p>
<p>By the way, higher rates don't imply lower borrowing, rates could increase due to an increase in demand for funds with static supply. <a href="https://www.themoneyillusion.com/never-reason-from-a-price-change/" rel="nofollow noreferrer">Never reason from a price change.</a></p>

CC BY-SA 4.0
2022-01-07T19:51:00.480Z
2022-01-07T19:51:00.480Z
James Wattam
<p><a href="https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/" rel="nofollow noreferrer">https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/</a></p>
<p>It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of years. I wonder if the major banks like JPM BoA Citi etc., will necessarily benefit (become more profitable) from such hawkish money policies simply because they will have higher interest rates, or suffer from these policies, since less people could afford to borrow money from them.</p>
<p>Although this intuitively makes sense, the reason that I believe this might not be true and thus want to ask experts is that, in 2018, the share prices of those banks dipped when there was a rate hike. But I am not sure if there were any causation since the stock prices don't always reflect the fundamentals of companies/banks.</p>

<banking><federal-reserve><investment><fed-funds-rate>
Are major banks in US necessarily going to benefit from the rise of federal fund rates?
No One
# Are major banks in US necessarily going to benefit from the rise of federal fund rates?

(Asked by: username_0 on 2022-01-07)

<https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/>

It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of years. I wonder if the major banks like JPM BoA Citi etc., will necessarily benefit (become more profitable) from such hawkish money policies simply because they will have higher interest rates, or suffer from these policies, since less people could afford to borrow money from them.

Although this intuitively makes sense, the reason that I believe this might not be true and thus want to ask experts is that, in 2018, the share prices of those banks dipped when there was a rate hike. But I am not sure if there were any causation since the stock prices don't always reflect the fundamentals of companies/banks.

**Tags:** banking, federal-reserve, investment, fed-funds-rate


---

## 1 answers

### Answer by username_1 on 2022-01-07. Score: 3

Major banks will not *necessarily* benefit from a rise in the federal funds rate. One way major banks make money is from the difference between the interest rates they borrow at and the rates they lend at (their net interest margin). If interest rates, including the Federal Fund rate, increase, major banks benefit if the difference between the rates increases.

By the way, higher rates don't imply lower borrowing, rates could increase due to an increase in demand for funds with static supply. [Never reason from a price change.](https://www.themoneyillusion.com/never-reason-from-a-price-change/)


---

