Streamlined SRT process aims to optimize capital management while ensuring resilience The European Central Bank (ECB) is set to accelerate the approval process for Significant Risk Transfers (SRTs) , a move designed to improve capital efficiency for banks while maintaining financial stability. The ECB’s pilot program, scheduled to begin in early 2025 , will simplify procedures and reduce approval timelines, aligning with the growing demand for efficient capital allocation across European lenders. What’s Changing? The ECB, in collaboration with the European Banking Federation , is introducing a pilot program to shorten the SRT approval process. The notification period for SRT transactions will be reduced from three months to two weeks before deal finalization. The information submission requirements will be streamlined to ease regulatory burdens for banks. These changes are expected to make SRT transactions more attractive , all...
As the Federal Reserve gears up for its final meeting of the year, expectations are high for another quarter-point rate cut. But the real story lies in what happens after this month, with 2025 shaping up to be a slower, more cautious journey for monetary policy.
A Cheerful Start to December
Policymakers are almost certain to lower the benchmark federal-funds rate next week, a move aimed at aligning interest rates with current economic realities. Inflation has eased significantly from its 2022 highs, and the labor market, once tight, is stabilizing. This upbeat tone might call for a soundtrack akin to a celebratory march — a recognition of progress without overexuberance.
The November consumer price index (CPI) showed inflation rising by 0.3% month-over-month and 2.7% year-over-year. While firmer than previous months, much of the increase was due to temporary factors like rising food, used car, and hotel costs. Additionally, rent inflation has slowed to levels consistent with the Fed's 2% target, suggesting that future inflationary pressures may ease.
A Softer Landing in 2025
The Fed’s projected "neutral rate" for the economy is around 3.5%, but the current fed-funds rate of 4.50% to 4.75% remains above that range. Policymakers appear set to continue easing, but they’re unlikely to rush. In fact, the Federal Open Market Committee (FOMC) could signal a pause in rate cuts early next year, dialing back the optimism slightly.
According to ING Chief International Economist James Knightley, the Fed’s upcoming Summary of Economic Projections is expected to show just three rate cuts for 2025, down from four projected in September. This reflects a cautious approach to navigating uncertain fiscal and labor market conditions in the year ahead.
Inflation and Labor Market Challenges
While inflation is on a downward trend, pockets of vulnerability remain. Revised data from the Bureau of Economic Analysis indicate slower growth in labor costs, easing some pressure on inflation. Still, fiscal policy uncertainties and soft spots in the labor market could complicate the Fed’s task.
The Fed’s decisions will likely hinge on a mix of caution and flexibility, balancing the need to support economic growth with the imperative of bringing inflation fully under control.
A Thoughtful, Measured Approach
Next week’s rate cut may carry an upbeat tone, but 2025 promises a slower, more measured rhythm. Like a jazz improvisation, the Fed’s path forward will require adaptability and attentiveness to evolving data. Investors should brace for a year of deliberation rather than dramatic policy shifts.
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