Bank Of America Profit Drops On Loan-loss Reserve Build

Following a significant increase in interest rates by the U.S. Federal Reserve, three big U.S. banks are lifting their prime lending rates to the highest levels seen since the 2008 global financial crisis.

The higher rates, including the most recent 75 basis point increase, were announced on Wednesday by JPMorgan Chase & Co (JPM.N), Citigroup Inc, and Wells Fargo & Co (WFC.N).

Until evidence demonstrates a prolonged decline in consumer prices, the U.S. central bank will continue to raise interest rates.

According to the median prediction of all 19 policymakers at the Fed, central bankers now anticipate that rates will increase to 4.6% by the end of next year.

Since it can generate higher net interest income—a statistic that measures the difference between the money banks make on loans and pay out on deposits—a rise in interest rates often increases a bank's profit.

Higher interest rates, however, have the potential to stifle the economy and reduce consumer demand for loans, which might eventually harm lenders.

Lance Roberts, chief financial strategist and economist at RIA Advisors, predicted that rising interest rates will slow down both consumer and business borrowing.

Refinitiv data revealed that expectations for how aggressively the Federal Reserve will hike rates in its battle against inflation reached a new high of 4.64% from 4.45% last week.