be resilient and survive periods of significant change, it will likely be because the boards and management of firms had the foresight, as well as the ability to take sometimes hard decisions, to ensure their product offering, their unique selling point, had sufficient revenue generating ability to cover the associated costs, and critically to build reserves for future investment as well as to cover risks. many of these risks we already know about, but given the current pace of change in financial services, as well as the level of uncertainty in the economic and geopolitical environment, there are undoubtedly many risks that we do not yet know about, or do not yet fully understand. 4 / 9 bis - central bankers'speeches so in terms of reserves, in periods of significant change and uncertainty, it can never have been more important for me to emphasise that regulatory reserves are minimum standards, not targets, and it is therefore incumbent on boards as well as the management in firms, including in credit unions, to identify and diligently manage risks and threats to their firms'balance sheets, in particular existing and emerging operational and credit risks. credit unions the good news is that credit unions in ireland, both on an overall sectoral basis and individually, are by and large well - positioned from a financial conditions perspective, to not just navigate the current disruption and market uncertainty, but also thrive. average reserves as a percentage of total assets in the credit union sector were 16. 2 % as at september 2023, marginally up on the previous year. the average rate of loan arrears is at the lowest level observed for many years, while the sector loan book has increased to just over €6 billion, a 12 % year - on - year increase. higher interest rates will feed through to higher revenues, as the extended period of unusually low interest rates comes to an end. but as a regulator, and also as an economist, it would be remiss of me not to take this opportunity – with this large audience – to sound a note of caution. we need to be very careful to avoid the trap of believing that because the financial sector in ireland - and indeed more globally - navigated a global pandemic relatively unscathed, that somehow we can similarly navigate the current and expected future turbulence and emerge the other side having achieved the same outcome. to believe this ignores the fact that the monetary, fiscal and regulatory responses during the pandemic were exceptionally supportive, as central banks, governments and regulators took extraordinary

8 per cent for the euro area. the main reason for this concentration in ireland is that we are still endeavouring to address the infrastructure shortfall while, at the same time, housing construction has been exceptionally high. this high level of house building will inevitably moderate over time. despite the continued strong employment situation, inflationary pressures have remained relatively subdued. inflation fell back in ireland last year to 2. 3 per cent ( hicp ), very close to the euro area average of 2. 1 per cent, following some years of adverse differentials. however, we have seen some increase in the irish inflation rate in the past couple of months, due to higher oil prices, from the low point of 1. 9 per cent in march. the economy is expected to grow at a similar pace this year, with gnp growth of 5¼ per cent in 2005 ( gdp 5½ per cent ). a significant increase in employment of about 2¼ per cent is also expected. one of the challenges we face is to ensure continuing low inflation against this background of continuing strong economic performance. it is of vital importance that future pay increases and other cost factors take account of the low inflation environment that we are now in. there has been a small deterioration in the economy ’ s price competitiveness position in the last year, as reflected in the central bank ’ s competitiveness index ; this followed a number of years when there was a more significant worsening. however, competitiveness issues remain of concern. in particular, the irish economy is exposed to any sharp weakening of the us dollar against the euro that might emanate from the large global imbalances. additionally, our price level is some 15 per cent higher 1 / 3 than the euro area. it is necessary now to embed the low inflation regime that we have experienced over the past year in order to protect our competitiveness. you will recall that this time last year, we expressed our concerns about house price increases, which were running at a year - on - year rate of increase of 12 – 13 per cent. we felt at the time that unless house price increases were to slow to about the same level as nominal gnp, there was the risk of a sharp correction at some stage. house price increases have indeed shown a welcome deceleration with a year - on - year increase now of 7 per cent, against the background of increased housing supply. currently, house prices are increasing at an annualised rate of about 4 per cent. given