Central Bank Governor discusses local business, inflation and housing on Kilkenny visit

Governor of the Central Bank of Ireland, Gabriel Makhlouf, visited Kilkenny last week in a virtual capacity to speak with local business networks and students.

The trip forms part of a larger plan by the Central Bank to visit some of the country’s important business centres to hear directly from the people on the ground. For him, nothing beats local insight.

“We can sit in our offices in Dublin and we can make judgments about what’s going on but there’s nothing that can replace actually hearing it directly from particular business people,” he said.

One aspect of local interest that Makhlouf was particularly keen to learn about was the success of business networks such as Kilkenny Chamber of Commerce and the local branch of Network Ireland.

“I’m keen to learn more about local business networks as I anticipate that they will play an important role in post-pandemic economic recovery,” he continued.

The Central Bank Governor went on to hold a very productive meeting later that day with both the local Chamber and the local Network Ireland branch as well as with students of economics at Saint Kieran's College.

INFLATION

When asked by the Kilkenny People about the impact of rising inflation in vibrant street economies such as in Kilkenny, Makhlouf noted that current rates of inflation are ‘concerning’.

He added that rising inflation will hit local people’s pockets and spending power but that he expects that it will dissipate over time. 

“A lot of the inflation that we’re seeing is driven by a large combination of factors largely to do with the pandemic. With the lifting of restrictions over the past few months, we’ve seen demand from consumers increase very rapidly.”

Makhlouf predicts that inflation, currently running at over 5%, will begin dropping soon but ‘will still probably be above the European Central Bank’s target of 2% over the medium term’.

MORTGAGE RULES

When asked if current mortgage measures are contributing to the housing crisis in cities like Kilkenny, Makhlouf stated that such measures are vital to safeguard financial stability but that change may be coming.

“The objective of current measures, introduced back in 2015, is to stop reckless lending and reckless borrowing, a big reason behind the financial crisis,” Makhlouf said.

“We’re now undertaking a big review of them that will conclude later this year and we may have some new changes coming out of that review.”

The Governor added that recent research has indicated that if the Central Bank hadn’t put the current mortgage measures in place, house prices would be even higher now.

“We learned from the financial crisis that all reckless spending and reckless borrowing does is just drive house prices higher and higher, all while increasing people’s indebtedness, ultimately creating a situation where it’s quite easy for everything to collapse like a house of cards.

“The construction sector needs to build more houses. The planners need to allow more houses to be built. The whole system needs to work to produce a greater supply of housing that will help first-time buyers get on the property ladder.”