Dec 13 (USA) - The US Federal Reserve will most likely raise its key benchmark lending rate by 0.25% tomorrow. The current rate is 0.25 - 0.5% which has been the same since December 2015 when the US Fed raised interest rates for the first time in a decade.
The rising interest rates offer investors in US Banks especially Bank of America an opportunity to gain from rising interest incomes. Bank stocks have rallied to decade highs over the past month after the election of Donald Trump as the next President of the United States.
Donald Trump during his election rallies called for higher interest rates and even accused the UD Fed Chair Jannet Yellen of taking direct orders from the President and keeping interest rates low.
The rise in interest rates is almost certain tomorrow but analysts will be focusing on the tone of the US Federal Reserve as to how many more interest rate hikes can be expected in 2017.
Higher interest rates will make the US Dollar stronger against other currencies, a situation which may not suit the US exporters too much. So it will be interesting to see what the Fed says tomorrow. If they get too hawkish, expect the banking stocks like Bank of America, Citigroup, Goldman Sachs, JP Morgan and Wells Fargo to rise sharply otherwise these stocks could dip to give up gains of the last month.
Investors should look to take profits short term because these stocks are expected to outperform in 2017 by most analysts given the direction of the interest rates and the growth promised by the new President.
As far as the Nigerian Naira is concerned, the Central Bank of Nigeria should be worried by the rising interest rates in Washington. The CBN is always scared to increase interest rates and defend the Naira but that situation will have to change unless the Central Bank is prepared to further devalue the Naira and stoke inflation which will surely cross 20% unless they act sooner than later.
reporting for easykobo.com on Tuesday, Dec 13 2016 from Lagos, Nigeria