Archive

Bowman - Statement by Governor Michelle W. Bowman

Governor Michelle W. Bowman's speech outlines her dissenting view on the recent FOMC decision to lower the federal funds rate by 1/2 percentage point, favoring a smaller reduction of 1/4 percentage point instead. She acknowledges the strength of the U.S. economy, with solid growth and a labor market near full employment, while also highlighting the necessity of normalizing labor market conditions to control wage growth and meet the inflation target. Despite acknowledging progress in lowering inflation, she emphasizes that inflation remains above the 2 percent goal, posing significant risks, especially to lower- and moderate-income households. Bowman stresses the importance of not prematurely declaring victory on the price stability mandate and advocates for a measured approach to further progress towards a neutral policy stance to bring inflation down sustainably.

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Positivity: 70
Uncertainty: 45

Evans - A balanced approach to finishing Basel 3.1 in the UK

The Prudential Regulation Authority has published its near-final Basel 3.1 rules. In this speech, Phil explains why the package of reforms is needed. He also describes the balanced approach the PRA has taken to making substantive changes to some of the biggest issues from the consultation paper, based on feedback from firms. Overall, the package supports the UK’s growth and competitiveness, the resilience of the banking system, and alignment with global standards.


Phil Evans' speech provides critical insights into the Basel 3.1 reforms, particularly their aim to better capture risk so that firms maintain appropriate capital levels. The speech emphasizes a balanced approach, ensuring neither too little nor too much capital is held. Significantly, the reforms will impact various areas, including SME and infrastructure lending, and off-balance sheet items. The Prudential Regulation Authority (PRA) has adjusted its proposals based on extensive consultation feedback, ensuring they meet criteria for risk sensitivity and international alignment while addressing competitiveness and growth. The implementation of these reforms will be phased in over four years starting January 2026, reflecting the PRA's commitment to a thorough, evidence-based process.

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- Positivity: 80
- Uncertainty: 40

Breeden - Financial stability at your service

In these remarks – published alongside a companion article by Bank staff – Sarah Breeden talks about the Bank’s work on financial stability. She makes the case for policymakers to focus on the provision of vital services, which requires a better understanding of the dynamics of the system not just a focus on individual institutions. She also talks about the relationship between financial stability and economic growth.

Sarah Breeden’s speech provides a comprehensive overview of how the Bank of England approaches financial stability, emphasizing its dual objectives of price stability and financial stability. The Bank defines financial stability as the maintenance of vital financial services to households and businesses, even when faced with shocks. The speech discusses the necessity of addressing externalities and systemic risks through macroprudential policies, something the Financial Policy Committee (FPC) actively engages in. Breeden highlights the importance of prioritizing systemic risks and utilizing tools like the System-Wide Exploratory Scenario (SWES) to model and understand interactions within the financial system. The speech also underscores the importance of ensuring the provision of financial services in bad times, rather than trying to expand them in good times, and stresses the value of resilience against severe but plausible shocks. Additionally, systemic thinking is presented as a crucial component, one that can lead to different policy responses compared to microprudential perspectives. Lastly, the speech posits that resilience in the financial system is fundamental for sustainable economic growth and that financial stability must always be "at your service" to households and businesses.

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**Positivity: 70**
**Uncertainty: 60**

Barr - The Next Steps on Capital

Vice Chair for Supervision Michael S. Barr's speech discussed the importance of bank capital requirements in maintaining financial stability and the balance between ensuring bank resilience and keeping lending affordable. The speech emphasized upcoming changes to the Basel III endgame proposal and the capital surcharge for global systemically important banks (G-SIBs). Barr highlighted that stakeholder feedback has led to significant modifications aimed at balancing resilience with efficiency. The proposed changes are expected to increase capital requirements for G-SIBs by 9 percent, with other large banks also seeing smaller increases. Furthermore, he addressed adjustments for operational risk, market risk, and tiering to ensure the new framework better reflects the intricacies of bank activities. Barr also stressed the openness to further comments and the need for continual updates to reflect economic growth and inflation.

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Positivity: 70
Uncertainty: 40