The looming trade conflict between the US and the EU is “a serious concern”, the central bank chief said, stressing that Ireland is in a state of “significant change and instability”.
Gabriel Makhlouf said making predictions in a context of “high uncertainty” was a difficult task, adding that he did not want to “make assumptions” about the impact of US tariffs on the Irish economy.
On Monday, he noted that the central bank's view was consistent with that set out in a report on the potential impact of tariffs by the Department of Finance and the Economic and Social Research Institute (ESRI).
The study found that an active trade conflict between the US and the EU could lead to higher prices, fewer new jobs and slower economic growth.
Mr Makhlouf also added that the European Central Bank (ECB) should be cautious about its next interest rate decision, even though inflation is moving in the right direction.
He added: “I mean, in terms of inflation, a lot will depend on the actions that are taken, not just what those who impose tariffs do, but how others, including the authorities and businesses, react to those actions.”
“Companies may decide to change their supply chains. How will customers react? They may choose not to buy certain products because of prices, which creates a lot of uncertainty.
“I think our job, particularly in the area of antitrust policy, is to remain as attentive as possible to what is happening, to try to understand the current situation, to avoid making assumptions about the future, and to base our decisions on facts.
“In terms of the economic implications for Ireland, I have seen the comments of the Minister for Finance over the last few days, as well as the report from ESRI and the Department of Finance.
“Our views are consistent with these. We released our quarterly report last week and provided broadly similar information.
“It's really worrying. My overall feeling is that we are in a period of significant change and instability, and the most important thing we can do is keep a clear head, understand exactly what's going on and then make decisions about how to respond and discuss what our views are on the implications.
“I wouldn't like to start thinking in a way that might just be uncomfortable.”
When asked whether the ECB would reach its 2 percent inflation target by April next year, he said that while things were moving in the right direction, progress was slow and he was not on a “predetermined rate path.”
“The forecasts showed that we would reach 2 percent a little later than previously expected,” he added.
“I wouldn't put too much emphasis on that. What's important is that 2 percent is our goal.
“The reality is that we live in conditions of high uncertainty, so predictions become particularly difficult.
Sourse: breakingnews.ie
