Overseas Headlines- July 23, 2019

Date: July 23, 2019

United States:

Trump, Congress Clinch Debt-Limit Deal After Tense Negotiations

“President Donald Trump announced a bipartisan deal to suspend the U.S. debt ceiling and boost spending levels for two years, capping weeks of frenzied negotiations that avert the risk of a damaging payments default. Congressional leaders pledged to support the bipartisan compromise that left all sides unsatisfied but focusing on the provisions they could count as a win. “I am pleased to announce that a deal has been struck with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, Speaker of the House Nancy Pelosi, and House Minority Leader Kevin McCarthy – on a two-year Budget and Debt Ceiling, with no poison pills,” Trump said on Twitter. “This was a real compromise in order to give another big victory to our Great Military and Vets!” The House has to approve the budget bill this week before members leave July 26 for a six-week recess. The Senate can put it to a vote as late as next week. The White House, in a statement on Monday night, said “both House and the Senate should quickly move this deal to the president’s desk for signature.” Earlier, Pelosi and Schumer said in a joint statement that “Today, a bipartisan agreement has been reached that will enhance our national security and invest in middle class priorities that advance the health, financial security and well-being of the American people.” McConnell said in a statement he backs the deal and plans to hold a vote before the August recess. The broad agreement, finalized after weeks of negotiations between Pelosi and Treasury Secretary Steven Mnuchin, would suspend the debt ceiling until July 31, 2021, eliminating the risk that the government could miss payments as early as September. It would also cancel automatic cuts that would have reduced domestic spending by $55 billion and military spending by $71 billion compared with 2019 levels. Under the terms of the agreement, the budget cap for discretionary spending will rise to $1.37 trillion in 2020 and $1.375 trillion in 2021 — which doesn’t include the cost of programs like Medicare, Medicaid and Social Security that are automatically funded, according to a person familiar with the deal. That’s an increase from $1.321 trillion this year. Republicans were pushing for more defense spending and managed to secure $738 billion in 2020 and $741 billion in 2021, including funds for overseas operations that aren’t subject to budget caps. Democrats secured $632 billion in 2020 and $635 billion in 2021 for domestic spending.”




Boris Johnson Wins Race to Be Next British Prime Minister

“Boris Johnson, the public face of the Brexit campaign, won the contest to succeed Theresa May as British prime minister, taking over a country in crisis and a government on the brink of breaking apart. After a six-week leadership race, which he led from the start, 55-year-old Johnson defeated his rival Foreign Secretary Jeremy Hunt by a landslide in a ballot of the Conservative Party’s roughly 160,000 members. The pound erased the day’s losses against the dollar, and was up against all major peers after the announcement. The result marks the end of a bruising battle for the biggest job in British politics and the start of what threatens to be a brutal new phase in the civil war inside the government over Brexit. The incoming prime minister has just 100 days to negotiate a new divorce deal with the European Union before the U.K. is due to leave the bloc at the end of October. He must do so despite opposition from the EU and a growing rebellion from his own colleagues, including a group of ministers quitting the government because they can’t work for him. The rebels inside the party Johnson now leads are vowing to fight his policy of exiting the EU with or without a deal — “do or die” — by the hard deadline of Oct. 31. Adding to his problems is the Tories’ lack of an automatic majority in Parliament — and Democratic Unionist Party, the small Northern Irish grouping that props up the Conservatives, wants to renegotiate the terms of its continuing support. Even with the DUP on board, Johnson’s majority is perilously small, after a number of defections and defeats. Some Conservative believe a general election is inevitable and Johnson’s team have been war-gaming their options for a snap poll in the fall.”




China’s Central-Bank Governor Says Current Interest Rates Good 

“China’s central bank governor said the country’s current interest rates are at an appropriate level and the bank will make decisions on interest rates based domestic considerations. China didn’t follow the Federal Reserve in raising interest rates last year, and it’ll continue to “look at its own real situation” when making rate decisions now that the Fed is likely to cut, People’s Bank of China Governor Yi Gang said in an interview with Caixin published Tuesday. “Lowering interest rates is mainly to tackle deflationary risks, but China’s inflation is moderate at the moment,” with consumer price gains at 2.7%, he said. “Therefore the current interest rates level are appropriate, or close to a ‘golden’ level, a comfortable level.” Yi’s comments signaled policy makers remain satisfied with the targeted approach of stimulus for now even with the economy slowing. Rather than a straightforward cut to the benchmark interest rate, Yi pointed to a long-awaited reform to the rate framework that could help lower borrowing costs for the real economy. In that reform, Yi said the benchmark lending rate will gradually fade out and be replaced by the Loan Prime Rate, or the rates banks offer to their best clients. The LPR will make reference to more market-oriented interest rates, such as the cost of medium-term loans the PBOC makes to financial institutions, Yi said.”



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