US lawmakers reach budget deal

Congressional leaders and the White House have reached a two-year budget deal to lift mandatory spending caps on defence and domestic programmes and raise the federal debt ceiling to March 2017, averting the threat of another government shutdown during President Barack Obama’s time in office.

As part of the deal, which is due to be voted on Wednesday, defence and domestic programme spending would be raised by $50bn in fiscal 2016. The Overseas Contingency Operations fund would also cover $32bn more in defence spending to be used to fight the Islamic State in Iraq and Syria and for continued military activities in Afghanistan.

The outcome was a compromise between Republicans, who wanted defence spending to be upped, and Democrats, who were keen to increase domestic spending.

In addition, as part of the deal, congressional leaders proposed to sell 58m barrels of oil from US emergency reserves over six years starting in 2018.

US House speaker John Boehner said: “We have a bipartisan agreement that makes sure that the debt ceiling is increased, that we make good on our debt and our debt service, and it paves the way to fund the government this year and next."

"And the fact is that this will make it easier for the entire Congress for the balance of this year, and it will make next year a whole lot smoother for the Congress as well," he added.

“We had no doubt that a deal on the US debt ceiling would be reached to avoid any default risk walking into the election year. However, the concretisation of an agreement between the White House and US lawmakers will certainly remove some political uncertainty for Fed as it starts its two day meeting,” said Ipek Ozkardeskaya, market analyst at London Capital Group.