The governor of the Central Bank has cautioned that Ireland is going through a time of “significant change and volatility” and called the impending trade fight between the US and the EU “extremely concerning,” reports Breaking News.
Forecasting during a period of “extreme uncertainty” is difficult, according to Gabriel Makhlouf, who also stated that he was hesitant to “speculate” on how US tariffs will affect the Irish economy.
He stated on Monday that the Central Bank’s stance is consistent with a report from the Economic and Social Research Institute (ESRI) and the Department of Finance about the possible effects of tariffs, reports Breaking News.
It concluded that a fierce trade war between the US and the EU would raise costs, reduce the number of new employment, and limit economic development.
Mr. Makhlouf added that even if inflation is trending upward, the European Central Bank (ECB) has to exercise caution when making its next interest rate decision.
He added: “I mean, as far as inflation is concerned, a lot will depend on exactly what is done, and not just what is done by the people imposing tariffs, but what is done in response to those, and not just by the authorities and how they respond, but also how businesses decide to respond. They may decide to change their supply chains. How consumers respond. Consumers may choose that they’re not going to buy particular products because of the price, there’s a lot of uncertainty in that,” reports Breaking News.
“I think the job that we have to do, certainly in merger policy, in terms of the ECB, is just being extremely vigilant as to what’s going on, try and understand what’s going on, try not to speculate about what might happen, and make decisions on the basis of speculation. I mean in terms of the economic impact on Ireland itself, I’ve seen the comments that the Minister for Finance has made in the last few days and the ESRI and the Department of Finance report. Our views are not inconsistent with those. We published our quarterly bulletin last week and basically gave a similar message,” reports Breaking News.
In response to a question on whether the ECB would meet its 2% inflation objective in April of next year, he stated that although progress is being made, they are taking their time and are not following a “predetermined rate path.”
“The projections have shown us reaching 2 per cent, just slightly later than the previous ones. I wouldn’t put too much weight on that. The important thing is, 2 per cent is what we’re aiming for. The reality, of course, is that we are living in a time of extreme uncertainty, so forecasting is a particular challenge. I mean, you need to have a cut-off date, but when so much is happening, inevitably things happen after the cut-off date that play a part in that. I’m not too worried about the precise timing. We do, however, need to be pretty prudent and pretty cautious about changes to our monetary policy stance when we’re not yet a (inflation) target and when quite exceptional events are happening around the world, which could have a direct effect on inflation,” reports Breaking News.
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