The Bank Policy Institute, the American Bankers Association and others said proposed changes would address "some if not all" of banks' concerns about stress tests, but they are filing the lawsuit to preserve their legal right to do so.

The Federal Reserve will seek comment on the current stress-testing regime with an eye toward increasing transparency and reducing volatility. Modifications would not go into effect until at least 2026.

Proposals to streamline U.S. banking regulators have resurfaced with the Trump administration's focus on efficiency, but experts and history suggest such changes are unlikely amid political and industry resistance.

A week ahead of inauguration day, Scott Colbert, executive vice president, director of fixed income and chief economist at Commerce Trust, takes a look at how the Federal Reserve and the economy will fare in President-elect Donald Trump's second run in the White House. Social Media Pitch: X: As we prepare for Trump 2.0, Join us live at 11 a.m. on Jan. 16 to hear Scott Colbert, executive vice president at Commerce Trust, as we discuss the economy and the Fed in a second Trump presidency. FB/LI: As we prepare for Trump 2.0, Join us live at 11 a.m. on Jan. 16 to hear Scott Colbert, executive vice president at Commerce Trust, discuss the economy and the Fed in a second Trump presidency. The relationship between Trump and Fed Chair Jerome Powell has been contentious, but Trump has backed away from suggestions he'd fire the chair.

Annualized inflation increased to 2.7% in November from 2.6% the previous month, providing further evidence that the economy remains strong despite restrictive monetary policy.

Economic forecasts include the possibility of higher inflation and slower growth that could stall future cuts to the federal fund rates.

Federal Reserve Gov. Christopher Waller said the central bank's last framework review was too focused on the post-global financial crisis period and difficult to explain.

Yields on the U.S. five-year note added as much as six basis points to 4.10% after tumbling a quarter-percentage-point last week. 

In its latest financial stability report, the Federal Reserve warned high equity valuations and low levels of liquidity could leave the financial system vulnerable to shocks.

The Federal Reserve governor said the Supreme Court ruling could bring needed transparency and efficiency to regulatory policymaking.