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...
Key Takeaways:
Fed's December Rate Cut Likely:
- Market Consensus: Fed-funds futures show nearly a 100% chance of a quarter-point rate cut at the Dec. 17-18 meeting.
- Reasoning: The decision reflects broader economic trends rather than the latest inflation figures.
Inflation Progress:
- Core Inflation: Remained steady at 0.3% month-over-month in November, with an annual rate of 3.3%, consistent with October's pace.
- Overall CPI: Increased slightly by 0.3% month-over-month, with a 2.7% annual rate, signaling some stabilization.
Fed’s Perspective:
- San Francisco Fed President Mary Daly: Advocates recalibrating monetary policy to avoid stalling economic growth or damaging the labor market.
- Fed Governor Christopher Waller: Supports a cautious approach, recognizing recent inflation upticks but avoiding overreaction.
Encouraging Signs:
- Housing Inflation Normalization: Rent prices rose just 0.2%, marking a cycle low.
- Core Services Inflation: Excluding shelter costs, core services rose only 0.1%, the slowest pace since August.
- Transportation and Wages: Transportation prices remained flat, and nominal wage growth aligns with the Fed's inflation target.
Broader Economic Context:
- Labor Market: Employment conditions have returned to normal levels, reducing inflationary pressures from wage growth.
- Productivity Gains: Recent gains have been disinflationary, providing optimism for 2025.
Forward Guidance and Future Outlook:
- Expectations for 2025: The Fed may signal a pause in cuts early next year and a slower pace of reductions thereafter.
- Determined Goal: Officials remain focused on achieving a sustained 2% inflation target.
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