Regime Assessment:

• Transitional / Fragile Balance
• Medium Confidence
• The regime is fragile.

Why This Regime:

• Dominant drivers consistently indicate neutral or normal financial conditions. The Credit Conditions Signal (5), Financial Stress Composite (2), and Credit Spreads Signal (1) all report benign conditions.
• The Credit Conditions Signal (5) was weighted highly due to its aggregation hint, reinforcing a neutral interpretation. Other cyclical signals also show high interpretation confidence and no internal conflict.
• The Private-Credit Impulse Signal (8) was downweighted. This signal exhibits low conviction, mixed interpretation confidence, and an internal conflict flag. Despite a medium aggregation weight hint, these factors reduce its overall influence.

Alignment & Tensions:

• Strong alignment exists among most cyclical and tactical signals. The Credit Spreads Signal (1) reports "NORMAL" conditions. This is consistent with the "Neutral" calls from both the Financial Stress Composite (2) and the Credit Conditions Signal (5). The Financial Stress Index (11) further reinforces this neutral financial environment.
• A tension point is the Private-Credit Impulse Signal (8). While currently "Stable," its composite z-score is critically near the "Decelerating" threshold. This is driven by falling consumer loans, despite positive bank and business loans.
• This tension does not overturn the regime call. The Private-Credit Impulse signal's low conviction and internal conflict led to its downweighting. It flags a potential fragility rather than an immediate shift.

Scenario Balance:

• Dominant scenario: Credit conditions remain in a neutral or normal state, indicative of a stable corporate funding environment.
• Primary upside risk: A sustained improvement in overall risk appetite. This could lead to further narrowing of credit spreads and easing financial stress, pushing conditions towards an "EASY" or "Low_Stress" state.
• Primary downside risk: A re-escalation of financial stress or a firm deceleration in private credit. This would be triggered by widening credit spreads or increased systemic uncertainty.

What Would Change the Regime:

• A sustained increase in the Credit Conditions composite above +0.75, signalling a shift to a Tightening regime (5).
• The Financial Stress Composite z-score rising above 0.75, indicating a transition to a High_Stress regime (2).
• A firm transition of the Private-Credit Impulse signal into a "Decelerating" regime. This would be driven by continued contraction in consumer credit and further deceleration across other loan categories (8).