gabriel makhlouf : opening statement - joint oireachtas committee on finance, public expenditure and reform, and taoiseach opening statement by mr gabriel makhlouf, governor of the central bank of ireland, at the joint oireachtas committee on finance, public expenditure and reform, and taoiseach ( head of parliament ), dublin, 9 october 2024. * * * good afternoon chair, committee members. thank you for the invitation to appear before you today. i am joined by deputy governors vasileios madouros and derville rowland. i will begin by giving a brief overview of the economic outlook in the eu and in ireland, before i touch on some consumer protection issues. the economic outlook in the eu turning to the outlook, growth in the euro area as a whole slowed in the second quarter of 2024, driven by weaker investment and consumption. having said this, the latest projections are for a consumption - led growth recovery, albeit marginally weaker than what was previously expected. employment growth is projected to be somewhat weaker than its pre - pandemic average. we remain on track to reach our 2 per cent inflation target in the fourth quarter of 2025, although some uncertainty remains around this baseline forecast. in particular more persistent services inflation and stronger than expected wage growth could impact the forecast. at the most recent ecb governing council meeting, my colleagues and i decided to lower the deposit facility rate by 25 basis points, to 3. 5 per cent. this was informed by the euro area inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission. last month we also implemented changes we had announced in march to the operational framework for implementing monetary policy, which sees the spread between the main refinancing operations rate ( mro ) and our main policy rate – the deposit facility rate – set at 15 basis points. the economic outlook in ireland turning to the irish economy, it continues to grow at a strong pace supported by the buoyancy of domestic economic activity. our latest quarterly bulletin – published last month – paints a picture of a resilient domestic economy poised to grow in the region of 2. 5 per cent annually through to 2026. headline inflation has eased considerably to below 2 per cent, and is expected to remain between 1. 5 and 2 per cent out to 2026. 1 / 4 bis - central bankers'speeches however, challenges to maintaining such performance are becoming more evident. stronger than expected growth

, over and above the economy's potential rate, has brought into sharp focus domestic supply and infrastructure constraints. these, in turn, present a situation where globally - determined inflation in ireland is declining substantially, while more domestically - driven inflation, as reflected in services price inflation, remains significant at around 4 per cent. given current conditions, the continued expansionary fiscal stance adds unnecessary stimulus to an economy at full employment. against the current macroeconomic backdrop, increasing net spending in excess of 5 per cent over an extended period implies that the fiscal stance will aggravate price inflation and wage pressures, undermining competitiveness and creating risks that could damage sustainable economic growth. as my pre - budget letter of 4 july to the minister for finance – and the paper on the housing market we published last month – observed, higher levels of public investment are likely to be required over the coming years given known deficits in housing and to meet longer term structural challenges linked to the climate transition. so while the projected increases in public investment are necessary, careful management of the overall fiscal stance is needed to avoid overheating. with the economy already at full employment, there is a risk that increasing public investment on the scale envisaged fuels overheating pressures and results in poor value for money. to avoid this outcome, it would have been preferable if the upward revisions to public investment had been accommodated while keeping overall net spending below 5 per cent. undoubtedly, this would have presented difficult choices and trade - offs to be made in other areas of expenditure and on taxation. furthermore, to ensure additional government expenditure yields real improvements in services and that infrastructure investment is delivered efficiently, essential change outside of fiscal measures is needed in broader public policy areas. this includes in particular addressing delays and bottlenecks in the planning system, in the building regulation process and in construction. progress in these areas would also help to further incentivise and crowd - in private investment. consumer protection let me turn to consumer protection. the central bank's mission is to serve the public interest by maintaining monetary and financial stability while ensuring that the financial system operates in the best interests of consumers and the wider economy. all of our work is aimed at serving the public interest and protecting consumers of financial services, whether it is through the consumer protection code, the mortgage measures, monetary policy, our oversight of payments systems, or supervising to ensure firms are resilient and are acting in the best interests of their consumers. the environment in which we operate