Dominating the headlines this weekend was news David Cameron has called for his referendum on Britain’s membership of the EU to take place on 23 June. Speaking from outside Downing Street, the prime minister said he had secured a good deal with Brussels to give the UK a special status and leaving the EU would “threaten our economic and national security”.
Three key points to be taken from the deal surround Sovereignty, Migrant Benefits and Economic Governance. Firstly David Cameron has secured a commitment to exempt Britain from "ever closer union" to be written into the treaties. He has also negotiated the inclusion of a "red-card" mechanism, a new power. If 55% of national parliaments agree, they could effectively block or veto a commission proposal.
Secondly, compromises were made on migrant benefits in the face of strong opposition from Poland and three other central European countries. He got the four-year "emergency brake" on in-work benefits he had set such store by, but new arrivals will have their tax credits phased in over four years. Mr Cameron failed in his original demand to ban migrant workers from sending child benefit money back home. The UK government has already reached an agreement on out-of-work benefits. Newly arrived EU migrants are banned from claiming jobseeker's allowance for three months. If they have not found a job within six months they will be required to leave. The Council would authorise that Member State to limit the access of newly arriving EU workers to non-contributory in-work benefits for a total period of up to four years from the commencement of employment.
Lastly, economic governance was tackled as Cameron won guarantees that countries outside the Eurozone, such as Britain, will not be required to fund euro bailouts and will be reimbursed for central EU funds used to prop up the euro. The cabinet formally agreed to campaign to stay in despite several ministers openly supporting a Brexit with Boris Johnson a high profile supporter of leaving the EU.
Our Justice secretary Michael Gove has said that the European Union is encouraging extremism across Europe as he joined five other cabinet ministers in breaking ranks with David Cameron to campaign to take Britain out of the EU.
In other news Inflation edged up to its highest rate for a year last month as rises in the price of alcohol and clothing pushed up the cost of living. The consumer prices index rose to 0.3% in. Alcohol and tobacco rose by 1.3%, The Office for National Statistics said inflation also rose as fuel and food prices dropped less than they did a year ago. But despite the rise in CPI, the Bank of England predicts inflation will remain far below the government’s 2% target for some time yet.
The jobless rate in the U.K. held steady at a ten year low in December, while the average earnings index increased in line with expectations.
The Claimant Count (the number of people who are receiving benefits) fell by 14,800 in January, compared to expectations for a decrease of 3,000 people, and following a drop of 15,200 a month earlier.
The USD reached Seven year highs against the GBP at 1.4055 on Monday 22nd following news of a Brexit referendum to take place on 23rd June
The Federal Reserve minutes earlier in the week supported a growing view that the Fed would back away from a signal it sent in December about possibly raising rates four times this year due to the recent slowdown in global growth and steep stock market drops. Federal Reserve policy makers debated their outlook for interest rates last month expressed concern that the fall in commodity prices and the rout in financial markets increasingly posed risks to the U.S. economy.
Data revealed later in the week revealed US inflation continued to climb in January to a rate of 1.4 per cent opening the door for further interest rate hikes later this year. The figure revealed rising rents and medical costs lifted inflation to beat forecasts. This will abate fears that the Federal Reserve increased rates prematurely in December ahead of a period of market volatility and weaker global economic data. Solid labour market indicators, including strong payroll growth and healthy growth in real disposable income suggest that underlying US economic fundamentals remain sound.
The Euro took a back seat this week following President Mario Draghi speech on Monday 22nd which signalled potential that further monetary policy easing is likely in March saying the ECB is ready to do its part.