Last Week In Review: A Finacial Roundup

Monday?

Bank of England prepares for 'once in a generation' overhaul in forecasting

The Bank of England (BoE) plans to redesign the system in which it produces and relays the economic outlook after receiving criticism for failing to predict post-pandemic inflation.??

Governor Andrew Bailey suggests abandoning the existing "fan chart" forecasts in favour of scenario-based projections alongside a central forecast. This change aims to enhance internal policy debates and communication amid volatile conditions.?

Moving away from fan charts, scenarios would depict diverse economic outcomes, aiding understanding and decision-making. The BoE also debates adopting the Fed's dot plot method as an alternate. However, these methods don’t come without challenges. Yet Bailey sees these changes as crucial in adapting to an unpredictable world, signalling significant upcoming transformations in the BoE's operations.

Click the link below to read the full story https://www.ft.com/content/2db61c2a-9af6-45b9-b27e-98d2825fefa8

Tuesday

World Bank set to issue up to $1 bln in debut hybrid note this year

The World Bank plans to issue a hybrid note worth up to US$1 billion in its first venture into capital markets this year. This move aligns with the G20's call for multilateral lenders to explore hybrid financing to enhance lending capacities.

Following the African Development Bank's issuance of a similar note in January, the World Bank seeks to establish this as a new asset class. George Richardson, the World Bank Treasury Director, indicates the potential for a pilot transaction this year and expresses optimism about finding innovative funding methods.?

Richardson believes that hybrid capital presents a stronger credit compared to senior, unsecured bonds due to the unique governance and ownership structure of multilateral development banks. The World Bank aims to leverage this hybrid instrument to bolster its lending capabilities while navigating market conditions and rating agency methodologies.

Click the link below to read the full story https://www.businesstimes.com.sg/companies-markets/banking-finance/world-bank-set-issue-us-1-billion-debut-hybrid-note-year

Wednesday?

The Bank of England and the FCA issue joint consultation and draft guidance on the digital securities sandbox?

The Bank of England (BoE) and Financial Conduct Authority (FCA) are seeking input on their proposed Digital Securities Sandbox (DSS), an initiative to foster innovation in digital assets within the UK.?

The sandbox allows for the testing of new services with real customers under controlled regulatory conditions. The DSS will adapt regulations to allow firms to utilise technologies like Distributed Ledger Technology (DLT) in trading and settling digital securities such as stocks and bonds. Successful applicants will be able to offer securities depository and trading services from a single entity, fostering competition and innovation.?

They anticipate that this innovation could enhance efficiency and resilience in the financial system. The sandbox will operate for five years and may pave the way for a permanent regulatory framework for securities settlement. The consultation period ends on May 29, inviting industry feedback and collaboration during that time, with final guidance expected to be published in the summer.

Click the link below to read the full story https://www.bankofengland.co.uk/news/2024/april/the-boe-and-fca-issue-joint-consultation-and-draft-guidance-on-the-digital-securities-sandbox

Thursday?

Eurozone Activity Begins to Recover as Services Drive Growth, PMIs Show

The eurozone's private-sector activity rebounded last month, indicating a shift towards recovery.?

The HCOB Flash Eurozone Composite PMI Output Index rose to 50.3, signifying expansion for the first time since May 2023, contrary to previous estimates of contraction. Optimism prevailed among businesses for the upcoming months, with the expectations index reaching its highest since February 2022.?

Southern European economies like Spain and Italy led the expansion, while Germany and France lagged behind. Despite challenges from Russia's invasion of Ukraine and subsequent market turmoil, signs of economic growth persist, with Spain and Italy recording robust growth in the first quarter.?

This recovery trajectory suggests a soft landing, supported by expectations of a decrease in the European Central Bank's key interest rate.

Click the link below to read the full story https://www.wsj.com/economy/global/eurozone-activity-begins-to-recover-as-services-drive-growth-pmis-show-bbde649a?mod=global_news_article_pos1

Friday?

IR35 tax changes contribute to economic inactivity

Controversial changes to tax rules affecting self-employed workers have led to increased economic inactivity, prompting calls for policy review.?

A survey found that 10% of contractors are not working due to recent IR35 changes, shifting tax responsibility from individuals to contractors. Over half of contractors rejected job offers within IR35, and 24% planned to seek overseas contracts.?

Critics argue the reforms deter legitimate economic activity, prompting calls for government review. Meanwhile, starting April 6, changes will prevent "double taxation" for misclassified contractors, relieving financial risk for businesses. Without this adjustment, companies could face substantial tax bills.

Click the link below to read the full story https://www.ft.com/content/1334138d-d735-4670-8516-942970fb924e