Makhlouf warns of inflation, reviews regulatory reforms
Central Bank of Ireland Governor Gabriel Makhlouf updated the Oireachtas Committee on the economic outlook, the EU Prospectus Regulation, and reforms to the Fitness and Probity regime. He highlighted upward revisions to inflation forecasts and the impact of a recent High Court judgment.
Global Headwinds, Domestic Resilience
The global economy faces heightened uncertainty from the Middle East conflict and Strait of Hormuz disruptions, impacting energy prices and supply chains.
For Ireland, Modified Domestic Demand growth is projected to moderate due to higher energy prices weighing on real incomes and consumer spending.
Inflation forecasts have been revised upwards to 3.5 percent this year and 2.9 percent in 2027, reflecting substantially higher international energy price assumptions than in the March Bulletin.
Multinational-led AI-related investment is expected to provide support.
Governor Makhlouf emphasized five priority areas for long-term economic resilience: growing supply-side infrastructure (housing, transport, energy, water), strengthening indigenous businesses, building fiscal buffers through prudent policy, supporting household resilience, and strengthening Europe's economic infrastructure.
He also stressed a broadly neutral fiscal stance to avoid contributing to inflationary pressures.
High Court Challenges Procedural Fairness
The Central Bank's statutory fitness and probity regime, established in 2010, ensures individuals in key financial roles meet competence, honesty, and financial soundness standards.
The Bank processes thousands of approvals annually and can prohibit non-compliant individuals.
A recent High Court decision, published April 17, 2026, did not confirm a prohibition notice, finding the Bank failed to observe natural justice.
Governor Makhlouf acknowledged this, outlining procedural reforms already implemented, including 2023 legislative amendments, revised guidance, and independent decision-makers.
An independent review in July 2024 also informed improvements, enhancing safeguards and transparency.
Further guidance will be published later this year.
Mandate Meets Moral Dilemma
The Central Bank's strict adherence to its EU Prospectus Regulation mandate reveals tension between statutory duties and public sentiment.
Inability to act on international law rulings without EU sanctions exposes a significant policy gap.
This underscores the limitations of a disclosure-only regime in addressing broader ethical and geopolitical concerns.