gabriel makhlouf : publication of the financial stability review 2024 : 2 opening remarks by mr gabriel makhlouf, governor of the central bank of ireland, on the publication of the financial stability review 2024 : 2, dublin, 4 december 2024. * * * welcome to the central bank for the publication of our second financial stability review of 2024. since the last review in june, we have seen a turn in the global interest rate cycle, with many central banks being able to start reducing interest rates. this change of stance largely reflects progress in reducing inflation, and increased confidence that inflation will reach its target levels in a sustainable manner in many countries. the fact that this level of disinflation has been achieved without significant instability speaks to the continued resilience of the global financial system. however, while inflationary risks may have receded, risks to the growth outlook have come to the fore. economic growth has been stable, but some forward - looking indicators of activity have weakened, particularly in europe, and there are diverging forecasts across regions. the key risks centre around uncertainty and rising geopolitical tensions, which raise the prospect of lower trade and gdp growth. a protectionist and fragmented world has negative implications for economic activity domestically and internationally, as well as for the resilience of households, firms and the financial sector. and with debt - to - gdp levels in many countries increasing recently, weak growth raises concerns over the ability of governments to support the economy in the event of a shock. financial markets have experienced periods of volatility since the last review, albeit these have been short - lived. this highlights underlying fragility in market sentiment, and the potential for market disruption if expectations change quickly or if there are further escalations in the geopolitical environment. compressed risk pricing in corporate debt markets and stretched equity valuations in some sectors leaves markets open to a swift repricing. as we have been warning for a number of years now, high levels of leverage in certain parts of the non - bank sector, and increasing interconnectedness between nonbanks and global banks, could amplify any shock to financial markets. turning to commercial real estate ( cre ), global and irish markets continue to adjust, and prices are showing some signs of stabilisation. however, there is still uncertainty over the full scale of the downturn in these markets. and in ireland, vacancy rates in the dublin office market remain high and

the conjunctural situation? or were the errors a result of the combination of these three factors? 1. the objective of monetary policy a large body of academic literature, stemming from the insights of friedman and phelps, provides the theoretical basis for establishing price stability as the objective of monetary policy. such an approach found overwhelming empirical support in our experience of the great inflation during the 1970s. it has reached its apogee in the modern benchmark macroeconomic model, which articulates – on a state - of - the - art, micro - founded basis – the welfare costs of deviations from price stability. 6 such thinking had an important bearing on the design of the institutional framework for monetary union in europe. the ecb has been assigned the primary objective of maintaining price stability in the euro area, establishing a clear hierarchy of goals with price stability at the fore. the clarity of this objective bolsters the credibility of the single monetary policy : it see h. theil ( 1964 ). optimal decisions for government and industry, amsterdam : north holland. see : m. goodfriend and r. king ( 1997 ), “ the new neoclassical synthesis and the role of monetary policy ”, nber macroeconomics annual 12, pp. 231 – 296 ; and j. j. rotemberg and m. woodford ( 1999 ), “ interest rate rules in an estimated sticky price model ”, in ed. j. b. taylor monetary policy rules, chicago university press, pp. 57 – 126. supports the institutional independence of the ecb and helps to stabilise private longer - term inflation expectations at levels consistent with price stability. at some other central banks, monetary policy has been given a dual mandate, with objectives such as economic activity, employment, financing conditions or financial stability in addition to the goal of price stability. i do not want to give the impression that we are indifferent to such concerns at the ecb : on the contrary, i will discuss in a moment how we can help to attain them. but monetary policy should not be over - burdened with additional objectives. it is too blunt an instrument to be effective in achieving all the goals i have just listed. for example, a central bank with a dual mandate to maintain price stability and support employment faces a particular dilemma in the context of a so - called “ jobless recovery ”. its ability to act in a timely manner to contain emerging inflationary risks may be curtailed by its obligation to support