Ireland financial stability report finds Ukraine war has amplified inflation here

THE CENTRAL BANK of Ireland published today the first Financial Stability Review (FSR) of 2022 which has shown how the war in Ukraine has put pressure on financial markets around the world, including our own.

The FSR describes the main risks facing the financial system and the Central Bank’s assessment of the resilience of the economy and the financial system to adverse shocks.

The review found that after a rapid economic recovery from the pandemic, Russia’s invasion of Ukraine has led to “lower global growth expectations and intensified inflationary pressures.”

The stability review showed that price pressures, coupled with a tight labor market, point to emerging pressures in certain sectors, including the housing market.

Central Bank Governor Gabriel Makhlouf said the latest revision comes after a series of shocks to the economy in sequence.

He said: “Russia’s invasion of Ukraine is first and foremost a human and social tragedy for the people of Ukraine. This horrible war has amplified many risks around the world, and inflation is now at the highest levels seen in four decades in many developed economies, including here in Ireland.”

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He explained: “It is this inflationary environment, and the range of unexpected and unprecedented shocks that have hit the global economy in recent years, that form the key backdrop to our risk assessment in June 2022.

The world is a more uncertain place now than it was just six months ago. In this context, prospective judgments about the evolution of the macrofinancial environment are particularly challenging.

On the resilience of the Irish economy itself, Governor Makhlouf said that households and businesses in Ireland continue to have significant capacity to cope with these risks and are in a better position to absorb the shocks compared to the start of the crisis. after 2008.

Regarding the resilience of the banking sector, the Governor added that retail banks are in a position to absorb negative shocks without adverse repercussions for consumers or the economy.

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