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An old saying says that central banks are supposed to take out the punch bowl just as the party begins …
But with interest rate control in Frankfurt rather than just Dublin, the Central Bank of Ireland has limited powers. mitigate global economic conditions. He has, of course, established mortgage rules that can now curb house price growth and has just adjusted the rules on bank capital
by warning of global economic conditions and persuading the government to be ultra cautious in his latest economic newsletter. it's not easy work. Indeed, the bank's economic forecasts are good, with strong GDP growth of 4.7 percent this year and 4.2 percent next year, with an unemployment rate below 5 percent .
average earnings
The bank, however, says the government should focus on risk, rather than on these optimistic predictions. It remains to be seen if the warnings about what could happen will be taken into account.
On the domestic front, the bank remains concerned about the overheating of the economy. Traditionally, overheating has been demonstrated by a rapid rise in wages and prices – as happened before the 2008 bust – and strong growth in bank lending. Currently, the overall inflation rate is low – and will be well below 1% this year – and the bank itself is forecasting sufficiently modest growth in average revenues, which is expected to grow by 2.5% this year and 3.3% next year. ] Inflation
At the current stage of a normal economic cycle, there would be more inflationary signs, but there has been nothing normal in the economy over the last decade and low inflation is evident in Europe.
In the quarterly bulletin of the Central Bank, we read that the low rate of inflation is mainly due to the evolution of goods, influenced by oil prices and exchange rates. In contrast, the price of services is increasing and is expected to increase by almost 2% this year and by 2.6% next year. So, in some areas, consumers are starting to pay the price of strong growth.
According to the Central Bank, the government must be cautious and aim to make the budget surplus next year.
On the international scene, the Central Bank also warns about what could happen. On Brexit, its forecasts for the economy are based on a withdrawal agreement being signed between the EU and the UK.
Significant disruption
If this does not happen, a significant disruption could occur and the cost of a hard Brexit – that's it According to estimates of the Central Bank, the government must use caution and should aim to put the budget in surplus next year and pay for additional fees.
However, with political pressure to spend more and tax less, it remains to be seen if anyone at Leinster House listens.
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