The Bank of England has voted unanimously to maintain the bank rate at 0.5% but says interest-rate increases likely will come sooner than expected. "Were the economy to evolve broadly in line with the February Inflation Report projections, monetary policy would need to be tightened somewhat earlier and by a somewhat greater extent over the forecast period than anticipated at the time of the November Report," according to the Monetary Policy Committee.
Credit markets may be the next to feel tremors amid fluctuating stock markets. "It doesn't make sense," writes Marcus Ashworth, "to have risk-off sentiment prevail in an incredibly liquid market alongside a risk-on approach in an illiquid one."
With yields on corporate bonds and government debt continuing to narrow in relation to each other, the market is providing one note of assurance amid shaky global markets, Mike Bird and Riva Gold write.
The European Commission has raised its estimate of 2017 economic growth in the EU and the eurozone to 2.4%, the fastest pace in 10 years. The commission forecasts 2.3% growth this year, followed by 2% next year.
Concerns about inflation are on the rise, bringing the prospect of rapid changes to central banks' accommodative monetary policies. "There is clearly a worry about inflation, and there is a follow-over to worrying about interest rates and bond yields," said James Bevan, CCLA Investment Management's chief investment officer.
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Regulators worldwide will be offered support and training to meet the challenge of enforcing post-crisis financial reforms through an online course slated for this year by the Bank for International Settlements and the International Monetary Fund.
Bundesbank board member Andreas Dombret, Germany's representative to the Basel Committee on Banking Supervision, says that international rules should pertain to cross-border banks and that national regulators should handle local banks. "Focused harmonization" of rules "is more important for social cohesion than economic efficiency" from globalization, Dombret says.
The US Court of Appeals for the District of Columbia Circuit has ruled managers of collateralized loan obligations are exempt from a post-crisis risk-retention requirement that issuers hold on to 5% of securities sold to investors. The ruling is expected to increase demand for highly leveraged corporate loans.
The EU continues to grapple with how best to finish work on a regionwide banking union, which has complications but is a potentially promising approach, writes Philip Alexander. "The EU seems to be changing its own approach: instead of arguing over the exact sequence of events to finalize the banking union, it is pursuing everything at the same time," he writes.
The Basel Committee on Banking Supervision's Fundamental Review of the Trading Book framework covering nonmodelable risk factors has industry participants concerned it will increase market-risk capital requirements. The committee is expected to clarify the framework for nonmodelable risk factors this quarter.
The European Central Bank's requirements for banks to set aside capital to cover bad loans might take effect April 1, the ECB's Daniele Nouy says. The effective date has been the subject of controversy, with objections from southern members of the EU causing delay, but targets and long-term timelines are expected to remain unchanged.
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