LONDON- Rocked by a major revolt against his leadership this week, British Prime Minister Boris Johnson will on Thursday promise to rejuvenate a flagging economy and make it easier for young people to buy homes.
Johnson will pledge “fiscal firepower” to help ease a worsening cost-of-living crunch for households, in his first policy speech since Monday’s vote of confidence in which 41 percent of his own lawmakers voted against him. Previous Conservative prime ministers who did better in such votes have been subsequently ousted.
Johnson’s announcement follows downgrades to UK growth forecasts from both the British Chambers of Commerce (BCC) and the Paris-based Organization for Economic Co-operation and Development (OECD), who predict stagnation ahead.
“Over the next few weeks, the government will be setting out reforms to help people cut costs in every area of household expenditure, from food to energy to childcare to transport and housing,” Johnson will say during a visit to the northern English county of Lancashire, according to excerpts of his speech sent from his office.
The prime minister will also address falling rates of home ownership, especially among young people, his office said.
Lawmakers in Johnson’s party called Monday’s confidence vote after scandals over COVID-19 lockdown-breaking parties at the heart of government.
While Johnson’s integrity lies at the heart of the issue, questions over his government’s economic record have also grown.
The OECD sees zero growth next year – the weakest of any G20 economy apart from Russia – while the BCC sees Britain’s economy shrinking 0.2 percent in the final quarter of this year before growing just 0.6 percent in 2023 and 1.2 percent in 2024.
“The downgrade reflects heightened political and economic uncertainty, and rising cost pressures which are limiting smaller firms’ abilities to invest,” the BCC said.
Johnson will say on Thursday that the government will cut costs for businesses and households.
“With more affordable energy, childcare, transport, and housing we will protect households, boost productivity and above all increase the rate of growth of the UK,” he will say.
The opposition Labor Party said Johnson was deluded.
“No wonder he is unwilling to face the reality that economic growth in the UK will grind to a halt next year,” Labor lawmaker Tulip Siddiq said of Johnson’s planned speech.
Meanwhile, the European Central Bank will pull the plug on years of stimulus on Thursday and signal a string of rate hikes to fight surging inflation, leaving markets only to guess the size and speed of policy tightening.
With inflation at a record-high 8.1 percent and broadening quickly, the ECB has already flagged a series of moves, hoping to stop rapid price growth from developing into a hard-to-break wage-price spiral.
Details remain elusive, however, as predicting inflation has proven impossible, suggesting the ECB will only signal its initial steps on Thursday and maintain plenty of discretion further down the line.
What appears certain is that the ECB will end its long-running Asset Purchase Program at the end of this month, promise a rate hike on July 21 and signal that the deposit rate will be out of negative territory in the third quarter.
Everything else, including the size of the initial rate increase from minus 0.5 percent, is likely to be left open, with ECB chief Christine Lagarde emphasizing flexibility and optionality.
While the bank has signaled a preference for 25-basis-point hikes, the energy-driven surge in prices could change that in just weeks. A handful of policymakers have already said that a bigger increase needs to remain in play.
Supporting their case, new economic projections from the ECB are likely to indicate that inflation across the 19 countries that use the euro will hold above its 2 percent target through 2024, pointing to four straight years of overshooting.
“The likelihood of a 50-basis-point hike is rising by the day,” Moody’s Analytics senior economist KamilKovar said.
“We currently view a 50-basis-point hike in July as possible but unlikely. In contrast, a 50-basis-point hike in September is as likely as it is unlikely at this point.”
“It is even possible that the bank will resort to multiple 50-basis-point hikes,” he said. — Reuters
