Higher Interest Rates Are Great for This Buffett Stock

During the early days of the coronavirus pandemic, markets faced a lot of turbulence, with stocks and other assets selling off hard. To calm markets and ensure the smooth functioning of the financial system, the Federal Reserve cut interest rates to near-zero while the federal government spent trillions in fiscal stimulus.

As a result of those policies, along with semiconductor shortages, supply chain disruptions, and rebounding consumer spending, inflation has risen to rates not seen in decades. Last December, the consumer price index came in at 7%, the highest reading since 1982. One of the Fed's two mandates is price stability -- and rising inflation is tolerable as long as it hovers around the central bank's 2% target. However, we've seen inflationary readings above 2% for almost a full year now.

As a result, the Fed is expected to raise interest rates to tamp down inflationary pressures on the economy. One sector that is especially sensitive to rising interest rates is banking, and U.S. Bancorp (NYSE: USB) is a lender in prime position to take advantage of this environment.

Source Fool.com