(Reuters) -Big U.S. banks said on Wednesday they were raising their base lending rates by a quarter of a percentage point each, hours after the U.S. Federal Reserve increased its benchmark interest rate in a bid to contain stubbornly high inflation.
Citigroup Inc (NYSE:C), Wells Fargo (NYSE:WFC) & Co, JPMorgan Chase & Co (NYSE:JPM) and Bank of America Corp (NYSE:BAC) said they were each lifting their base rates to 3.5% from 3.25%, effective Thursday.
Earlier, the Fed signaled it would begin to aggressively wean the economy off pandemic-era measures to curb decades-high inflation.
The central bank hiked its benchmark rate by 25 basis points, looking to counter economic risks posed by excessive inflation and the war in Ukraine. Policymakers signaled they would push the key federal funds rate to a range of 1.75% to 2.00% by the end of 2022.
Banks, which make money on the difference between what they earn from lending and pay out on deposits and other funds, typically thrive in a high interest rate environment.
In after-market trading, shares of big U.S. banks were up between 3.3% and 6.6% each.
The Fed faces the task of charting a course for the economy to weather rate hikes without a repeat of the 1970s-style predicament in which the central bank's rate hikes to fight inflation resulted in a steep recession.
Inflation, running at three times the Fed's 2% target and a hot-button political issue, has been worsened by the war in Europe which has led to a surge in commodity prices and piled pressure on to an already battered supply chain.