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EU rejects Chequers plan

The possibility of a hard Brexit came more sharply into focus during September as an EU summit in Salzburg rejected Prime Minister Theresa May’s Chequers plan. European Council (EC) President Donald Tusk acknowledged that the Chequers plan represented a “positive evolution”, but rejected the proposed framework for economic co-operation as detrimental to the single market.

  • US interest rates rose by 25 basis points
  • The US and China continued their “tit-for-tat” trade dispute
  • Inflationary pressures in Europe pick up

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The possibility of a hard Brexit came more sharply into focus during September as an EU summit in Salzburg rejected Prime Minister Theresa May’s Chequers plan. European Council (EC) President Donald Tusk acknowledged that the Chequers plan represented a “positive evolution”, but rejected the proposed framework for economic co-operation as detrimental to the single market. While Mrs May reiterated that “no deal is better than a bad deal”, the EU demanded some compromise on economic cooperation and the Irish border. The Confederation of British Industry (CBI) warned that “every day lost in rhetoric is lost investment and lost jobs”. The FTSE 100 Index rose by 1% over September. 

“The EU demanded some compromise on economic cooperation and the Irish border”

In the US, the Federal Reserve (Fed) increased its key federal funds rate by 0.25 percentage points to a range of 2% to 2.25%. The decision represented the third rise this year, and the eighth since 2015. Elsewhere, the tit-for-tat trade war between the US and China continued: following the US’s decision to impose levies on US$200 billion-worth of Chinese products, China accused the US of “trade bullyism” and launched countermeasures. During September, the Dow Jones Industrial Average Index rose by 1.9%. 

European Central Bank (ECB) President Mario Draghi hailed a “relatively vigorous pick-up in inflation”, although he expects the contribution of “non-core” components to lose momentum. Looking ahead, the annual rate of headline inflation is predicted to reach 1.7% each year until 2020. Confidence amongst German firms remained generally positive during September, although it weakened slightly compared with August, according to the Ifo Institute’s business climate index. Manufacturing was the only sector to experience a drop in sentiment. The Dax Index fell by 0.9% over September. 

The Bank of Japan (BoJ) maintained its monetary policy stance in September, keeping its short-term interest rate target at minus 0.1% and its annual objective of about 80 trillion yen for government bond purchases. BoJ Governor Haruhiko Kuroda does not intend to end the central bank’s programme of monetary easing measures until inflation reaches its 2% target; moreover, another increase in consumption tax is planned for October 2019, and Japanese interest rates are likely to remain unchanged until its impact has been assessed. The BoJ highlighted risks to Japan’s economic outlook, including US macroeconomic policy and the consequences of rising protectionism. The Nikkei 225 Index rose by 5.5% during the month. 


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