The Central Bank has issued a warning about the effects of global instability, particularly stemming from US-imposed tariffs, and how these might impact the Irish economy, reports RTE.
Central Bank Governor Gabriel Makhlouf stated: “There has already been some softening in consumer sentiment.”
Mr Makhlouf further noted that discussions with industry players revealed “cautiousness amongst companies, at least for now, in terms of new investments.”
He warned that any slowdown in activity by US-owned multinational firms—especially in sectors like pharmaceuticals and IT—could “affect employment, tax revenue and investment,” reports RTE.
He also said that tariffs would ultimately be damaging to the United States itself.
He added that EU retaliation in response to the Trump administration’s tariffs could influence inflation in Ireland.
His comments came as the Central Bank released its latest Financial Stability Review, reports RTE.
The Central Bank announced it would maintain its current requirement for banks to hold financial buffers to absorb economic shocks, but acknowledged that economic risks have increased.
Gabriel Makhlouf also remarked that the prospects for global economic growth have deteriorated.
He explained that global financial market turbulence in April—linked to announcements of US tariffs—led to increased liquidity needs among specific investment funds located in Ireland, reports RTE.
Additionally, the Central Bank reported today that foreign-backed lending for property investments had dropped by 80% between 2021 and last year.
However, Mr Makhlouf said the bank had not yet assessed the Government’s recent announcement regarding rent pressure zones.
He added that, globally, rent controls have been shown to “affect the supply of housing”, reports RTE.
“We should pull every lever we have to increase the supply of housing,” he stated.
The Central Bank Governor also expressed his view on the situation in Gaza, calling it “horrific”, reports RTE.
Gabriel Makhlouf has faced political criticism from opposition parties over the bank’s decision to authorise bonds issued by Israel.
Speaking to RTÉ, Mr Makhlouf said: “The pictures from Gaza are horrific – it is unconscionable,” reports RTE.
He explained, however, that the Central Bank must operate in accordance with legal requirements.
“The conflict should be stopped and stopped now,” he said, reports RTE.
He also added: “The Central Bank cannot be driven by what if feels it has to be driven by what the law says.”
Regarding interest rates, Mr Makhlouf said that rates set by the European Central Bank are currently at levels where they are expected to stay for some time, though he didn’t rule out future changes. Mr Makhlouf is a member of the ECB’s governing council, reports RTE.
“I certainly think we’re now in territory where we’re likely to remain in the foreseeable. Whether that means at the next meeting we decide not to move would really depend on the facts at the next meeting” in July, Mr Makhlouf said.
The Central Bank Governor concluded by saying that policymakers must act prudently and carefully, with euro zone growth facing downward risks and inflation challenges remaining uncertain due to the evolving status of tariff policies, reports RTE.
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