Bank stocks surge as Fed signals 2 interest-rate hikes before the end of 2023

• Bank stocks jumped after new economic projections from the FOMC suggested that the central bank will raise its benchmark interest rate two times in 2023.
• The KBW Bank index spiked as much as 1.2%, with JPMorgan jumping 1.6% at intraday highs.
• Higher rates boost the interest income for banks, which will directly increase firms' profitability.

Bank stocks ticked higher after new economic projections from the Federal Open Market Committee suggested that the central bank will raise its benchmark interest rate two times in 2023.

The KBW Bank index, which was trading lower ahead of the Fed's guidance, reversed course and spiked as much as 1.2% after the central bank signaled two rate hikes before the end of 2023. JPMorgan jumped as much as 1.6%, while Bank of America gained 1.5% at intraday highs.

The central bank previously placed its first forecasted rate hikes past 2023, signaling it was willing to let inflation run hot to let the US economy recover faster. Yet the median projections included in its latest set of forecasts see enough FOMC members supporting dual rate hikes in 2023. The projections are represented by dot plots, though Fed chair Jerome Powell said the dots should be taken with a "big grain of salt," in his press conference following the decision.

Higher rates boost the interest income for banks, which will directly increase firms' profitability. On Wednesday, the financials sector was the best performing sector in the S&P 500.

The yield on the US 10-year Treasury rose about 7 basis points to 1.57%, extending a rebound from a three-month low hit last week.