UK: Gov't Raises IHT Thresholds For Farms Following Rural Backlash
The Department for Environment, Farming and Rural Affairs published a statement confirming the inheritance tax relief threshold will rise to GBP2.5mn for farmers and businesses. DEFRA: "The reforms to agricultural property relief and business property relief mean that only a small number of estates with agricultural and business assets will pay additional inheritance tax." The change comes days after the publication of a report from Baroness Minette Batters, former president of the National Farmers' Union (NFU), regarding farming profitability, which stated many farmers were "bewildered and frightened" by the proposed changes.
- As the BBC reports, "The report did not look in detail at the government's proposed changes to inheritance tax, which are set to apply to farm businesses worth more than £1 million at a rate of 20% from April 2026. But Baroness Batters said it was raised as the single biggest concern by almost everyone in the farming sector she talked to as part of the review."
- The issue had become a significant political headache for PM Sir Keir Starmer's Labour gov't. Farmers have mounted high-profile protests around the Houses of Parliament with tractors, disrupting central London and gaining significant media attention.
- The very nature of Labour's large Commons majority will also have put pressure on Starmer. Historically, the centre-left Labour Party has represented seats in urban areas, while the centre-right Conservatives have represented rural seats. However, the massive gains Labour made in the 2024 general election mean that more than 100 of its MPs represent rural areas. With many of these MPs sitting on small majorities, the loss of support among farmers and the broader rural community would imperil their (already vulnerable) seats even more.
- Opinion polling in the new year will be closely watched to see if the increased threshold does anything to win back support for Labour in rural areas.
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RATINGS: Moody's Upgrades Italy To Baa2 From Baa3, Still A Notch Below Others
The Moody's upgrade to Italy's credit rating announced late Friday was the first from the agency since 2002 but shouldn't be considered a major surprise. Among the 3 major ratings agencies, Moody's had the lowest rating on Italy - by two notches (Fitch and S&P both BBB+).
- So this upgrade to Baa2 from Baa3 represents something of a closing of that gap rather than a major breakthrough for Italy.
- From the release:
- "The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP). It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, we expect that Italy's high government debt burden will gradually decline from 2027 onwards."
FED: Heading Into Its Final Weeks, QT Pace Remains At $20B/Month (2/2)
On the asset side of the Fed balance sheet, we saw a $25B drop in assets, of which just $2B could be attributed to QT in one of its final weeks (ends Dec 1).
- Instead it was a $6B drop in dealer repo operations vs a week earlier, and $17B in "other" areas that aren't related directly to monetary policy and typically don't have any significant impact on the size of the balance sheet (such changes are largely due to items such as bank premises, accrued interest, and other accounts receivable.)
- Discount window takeup edged up $0.3B to $6.1B but remains relatively low.
- QT has totaled just under $21B over the last month, around the expected pace, though as noted this will flatline in December with a pickup in net bills as MBS proceeds are rolled over into T-bills.
LOOK AHEAD: US Week Ahead: Retail Sales, PPI & Claims Headline Thanksgiving Week
A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
- As we regularly comment in this weekly publication, Redbook and Chicago Fed CARTS indicators point to solid nominal growth in retail sales, something broadly reflected in analyst consensus for the release.
- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
- Jobless claims will be watched particularly closely, both for latest initial claims for signs of layoffs and a notable update for continuing claims. The latter covers the payrolls reference period for November and will be an important reference point for FOMC members trying to get a sense of latest unemployment rate clues with the next payrolls reports coming after the Dec 9-10 FOMC decision (going into it with this week’s 0.12bp rise to 4.44% back in September).
