Although the Fed didn’t favor rising rates in November, there are enough reasons to bet on gradual rate hikes starting next month. The encouraging picture of the U.S. economy in the third quarter, propelled by a strong job market and increased consumer spending has led the Fed to signal a rate hike next month.

Needless to say, a gradual increase in federal funds rate could boost the banking industry. Therefore this might be the best time to bet on a few solid bank stocks.

Fed Keeps Rates Unchanged in November

The Federal Open Market Committee (FOMC) decided to keep interest rates at bay last week, citing moderate growth of business fixed-investment compared with significant growth earlier this year. The ongoing U.S.-China trade conflict could be a major reason behind the decline in business investments.

The Fed has therefore decided to maintain target range for the federal funds rate between 2-2.5%. But the Fed sees a near-perfect economic environment to gradually keep increasing rates in the near term.

Impressive U.S. Economic Growth

Strong consumer spending, which accounts for 70% of the economy, drove the latter in the third quarter to put up its best annual performance in 13 years. The present scenario is indicative of fast-growing spending by American households. The country’s gross domestic product also grew at an annualized rate of 3.5% against Dow Jones economists’ estimation of 3.4% for the same time frame.

Strong job gains and a declining unemployment rate led to substantial contributions as well, with the economy adding 250,000 new jobs in October across major industries, outpacing analysts’ estimation of 190,000. The unemployment rate went down to a 48-year low of 3.7% in October.

American labor force participation inched up to 62.9% in October from September’s 62.7%, pointing to a rise in the number of working-age people seeking jobs. The increased labor force participation can be considered as an indicator of candidates’ confidence in the country’s growing job market.