ECB Drops 'Restrictive' Term; Fed Proposes Averaging Stress Tests, Delays Capital Requirements by 3 Months

The European Central Bank (ECB) has removed the term "restrictive" from its latest monetary policy statement, signaling a shift in its assessment of interest rates. Previously, the ECB had described its monetary policy as restrictive, but the recent statement omits this characterization entirely. This change follows last month's adjustment when the ECB noted that rates had become "meaningfully less restrictive." Meanwhile, the U.S. Federal Reserve has proposed changes to its bank stress testing framework. The Fed's proposal, now open for public comment, includes averaging stress test results over two years and delaying the effective date of new capital requirements by three months. These adjustments aim to reduce fluctuations in capital requirements without materially affecting the overall capital standards. Additionally, the Federal Reserve plans to introduce transparency improvements later this year.