Good morning, and thank you to Financial Services Ireland for the invitation to speak to you today. Today’s Roundtable provides an opportunity to discuss the issues that go to the heart of building a financial system that serves people and the wider economy, and responds effectively to the needs of those who depend on that system.

IntroductionMy thanks to Insurance Ireland for the invitation to attend the European Insurance Forum 2025.  I am delighted to have the opportunity to speak here today, at an event which brings together so many insurance leaders and experts.The theme of the Forum, "Resilience and Revitalisation: Shaping the Future of Insurance”, is timely as it speaks to the insurance industry’s focus on the future. For regulators too this is important as we look to better understand, anticipate and adapt in the context of the far reaching changes taking place within the economy, society and financial system globally.This is also timely in the context of the Government’s recently published Action Plan for Insurance Reform 2025-2029, which we welcome and support. In my remarks today, I would like to touch on how the Central Bank of Ireland’s approach to the regulation and supervision of the insurance sector is evolving and to reflect on some key areas of focus as we look to the future, namely:Resilience in uncertain times;Accountability, Trust and Consumer Focus; andResponsible and Ethical Innovation.  But before doing so, I think it is worth reflecting on the importance of a well-functioning and resilient insurance sector.  Supporting people, businesses and the wider economyInsurance plays a critical role in supporting businesses and individuals in navigating and mitigating risks in an uncertain and rapidly changing world. Non-life insurance provides motor, property and liability protection to communities, increasing resilience and recovery in the wake of adverse events, whilst various speciality lines of business are a key enabler of international trade and investment.Life assurance provides financial protection and stability for families and dependents, as well as providing a key mechanism for savings and investment.  Our mandate in the Central Bank of Ireland, as you will know, is that we work to ensure that the financial system operates in the best interests of consumers and the wider economy. The insurance sector is no different, and so key to us, as a regulator, is ensuring that it functions in such a way as to provide this support.  Ultimately, people and businesses should be able to access products which are suitable for their needs: be clear on what is covered, what is not, and to what extent; and be able to rely on that cover being in place, and importantly paying out, should certain risks crystallise or life events happen.    Looking to the futureIreland is home to the fourth largest insurance industry in the EU, with a significant international component.   In 2024, premiums written by Irish firms equated to €109bn, of which more than 70% related to risks outside of Ireland, with exposures spread across more than 70 countries. This is not to forget the 2,400-plus retail intermediaries operating in Ireland, despite ongoing consolidation in this market.There are new opportunities and challenges emerging for the insurance sector with which both regulators and the insurance industry must contend. The financial system today operates against a backdrop of ongoing geopolitical tensions and uncertainty, which threaten economic growth and market stability.Digitalisation of the economy, including the growth of AI, presents both opportunities and challenges, bringing continued cyber resilience into sharp focus.Growing climate risks and ageing populations are presenting many challenges in the long and short term – and have the potential to significantly widen insurance "protection gaps".Future focused - our role and supervisory frameworkIn the context of these fundamental shifts in the environment, the Central Bank’s strategy is focused on four key safeguarding outcomes: Consumer and investor protection;Safety and soundness;Financial stability; and Integrity of the financial system. We are implementing a new supervisory approach, building on the strong foundations of our long standing risk-based and outcomes-focused approach to supervision.  In designing our new approach, we reflected on EU and global best practice while recognising also the particular strategic advantage the Central Bank has from having all elements of the central banking and financial regulation mandates in one organisation. Our new approach does not change the safeguarding outcomes we are pursuing.  However, it recognises the changing nature of the financial system, which increasingly transcends traditional regulatory distinctions such as “prudential”, “conduct”, and “anti-money laundering”, and delivers a more integrated approach to supervision, with multi-disciplinary teams working together to deliver our supervisory priorities in a more effective and efficient way.  The insurance sector will be supervised in an integrated, holistic way, in accordance with a multi-year supervisory strategy.  In addition, insurance firms that could most significantly impact on the achievement of our safeguarding outcomes will be supervised at an individual firm level.Under this new approach firms should hear one voice from the Central Bank, with more coordinated, consistent messaging and more streamlined demands across the full span of our regulatory and supervisory mandate.Importantly, under the new approach, we will: Continue to deliver an open and transparent engagement approach, to communicate clearly our priorities and areas of focus, and to listen to questions and concerns that may arise;  Remain risk-based and outcomes-focused and continue to take a targeted and proportionate approach to our supervision and to the use of our supervisory powers; and    Continue our engagement with key stakeholders, including through our participation at the European Insurance and Occupational Pensions Authority (EIOPA) and the International Association of Insurance Supervisors (IAIS), to work towards consistent application of regulatory standards and coordinated supervisory efforts.  SimplificationEurope is rightly looking to ensure its economy is productive and competitive into the future. Productive and resilient business sectors are central to that objective. To help deliver that, there is an increasing focus on the simplification of regulation, including financial regulation. It is important to remember that regulation plays a key role in the economy and financial system – enabling innovation, competition and cross border activity, while ensuring the financial system operates in the best interest of consumers and the wider economy, both in good times and bad. Given its importance, regulation should always be forward-looking, proportionate, predictable, and, to the greatest extent possible, harmonised. Supervision, in turn, should be risk based and outcomes-focused.   And in our view, regulators and supervisors should always be open to reviewing and considering existing frameworks, to see if we can deliver the same outcomes in different, and indeed “simpler”, ways that reduce the administrative burden on firms. Simplification done well is in line with these principles, which is why we are proactively engaging with the simplification agenda, at home and in Europe. Domestically, we have already identified and indeed implemented areas where we could simplify and reduce the burden and we will continue to do so.  By way of example, we have streamlined authorisation and change of business requirements and removed the requirement for an external audit of captive insurer's regulatory returns and public disclosures. At European level, the Solvency II review will carve out a proportionality regime for small and non-complex undertakings. In parallel, EIOPA is working to achieve simplification and burden reduction through a focus on harmonisation and a rationalisation of reporting requirements and guidance to firms and supervisory authorities.There is of course a careful and critical balance to be struck, and this requires industry to play its part too. Simpler standards cannot mean lower standards, and simpler standards will still need to deliver their intended outcomes.  We will all have a role in making sure that we get simplification right and it is so important that we do.  The outcomes of financial stability and consumer protection are now more important than ever as we will have no growth and no adoption of innovation, if the financial sector is not stable and consumers don’t have trust in it.Resilience in uncertain timesReturning to the three areas of shared focus I set out at the beginning of my remarks, let me take each in turn.In recent years the insurance sector has shown itself to be resilient in weathering significant inflation and interest rate shocks as well as volatile financial markets.  This has been welcome but I think we will all agree that there is no room for complacency.  Rising geopolitical tensions and economic divisions pose significant challenges for insurers, which serve to underscore the continued importance of prudent risk management and resilience across the financial system, and at an individual firm level, the maintenance of sufficient financial resources to withstand plausible but severe stresses. Close monitoring of the impact of changes in financial markets, the macro environment, the changing needs of your consumers, and over the longer term, climate, will need to remain at the forefront for industry and regulators both now and into the future.  Accountability, trust and consumer focus Turning to trust, this forms the foundation of the relationship between insurers and their customers, and so is something that it is critical to maintain. Consumers need to trust that insurers are providing value for money, ongoing service and support, and that they will honour the commitments they have made where insured risks crystallise.We believe that the development of consumer focused cultures, robust governance and well defined accountabilities are the fundamental building blocks of organisations that are trustworthy. These were key design principles underpinning the Central Bank’s Individual Accountability Framework.    We see the importance of consumer trust clearly resonating and reflected in Insurance Ireland’s strategy to “support building consumer trust in insurance” and this is very welcome.   This will involve the insurance sector playing an active role in relation to the measures needed to address emerging protection gaps. It will also require insurance firms to take steps to build trust with consumers through transparency, value for money, suitability of products, and high quality customer support and service.  Through our supervision, we will continue to examine how firms are delivering on their responsibilities to their customers and the continued commitment to building consumer trust in the insurance sector.  Responsible and ethical innovationLastly let me speak of innovation, something that is happening at pace in the financial sector, presenting both opportunities and risks.In recent years, innovation has brought new entrants, new products and new ways of serving customers and the economy. This has clear benefits for consumers, businesses and society and is an essential component of a competitive economy and a well-functioning financial system.  The digital transition, done right, has immense potential for delivering better outcomes for consumers, investors, and the wider economy.  It is important that you are ready to capitalise on that potential, and are proactively adapting your business models, strategies and systems to do so.But it is also important that regulators and industry account for both the opportunities and risks that innovation brings.  If the insurance sector is to continue to be resilient and to maintain trust, then innovation needs to be done in a way that is both responsible and ethical.The insurance industry has pioneered the use of data and statistics to make informed decisions on risk. The management of new data and technologies, particularly involving use of generative Artificial Intelligence, will require firms to consider carefully their ethical and responsible use, including the governance and controls required to oversee these technologies effectively. And we, as regulators, will be focused on developing a deeper understanding of use of Artificial Intelligence systems in the insurance sector and assessing whether firms have the necessary governance and risk management measures in place to harness innovation responsibly and well.    Closing remarksIt is important to acknowledge as we look forward that insurance firms and regulators have a shared goal in securing a well-functioning and resilient insurance sector into the future.Given the rapid change underway and ahead, in the nature, shape and digitalisation of the global economy and financial system, it is important we remain vigilant, maintain resilience, and ensure we are agile and adapting to the changing nature of financial services, the opportunities it provides and the changing nature of resilience it implies.I am reminded of a quote attributed to the French writer Albert Camus, who observed that “real generosity towards the future lies in giving all to the present”.This is a sentiment which I expect will resonate with us all and highlights the importance of our collective efforts and work today in securing a future where the insurance sector continues to support the needs of people, businesses and the wider economy.  My thanks to Brian Balmforth, Maura Killoran, Cian O’Laoide and James O’Sullivan for their help in preparing these remarks.

A Letter to Students of Economics – 2025

Chair and committee members, thank you for the opportunity to address you today. Martin O’Brien, Head of Irish Economic Analysis, joins me. In my opening statement, I will outline how the changing external environment is reshaping Ireland’s economic outlook, and how policy can respond by mitigating short‑term risks and supporting longer‑term prosperity.The Economic Outlook in a Period of Global ChangeDriven by the recent shift in US trade policy, Ireland faces a significant challenge from the current environment of heightened global trade uncertainty.The recently implemented Transatlantic agreement, which includes a 15 per cent tariff on EU goods entering the US, provides a measure of stability, although full implementation remains outstanding. Ireland’s economy presents varied risks across different sectors. A key factor is the structure of Irish multinational enterprises (MNEs): roughly half serve the domestic market and are less directly exposed to trade tensions, while the other half, concentrated in export-oriented sectors like pharmaceuticals and ICT, rely heavily on global value chains. These export-focused MNEs, where US-owned firms account for most employment and investment, are particularly vulnerable to trade tariffs and US policy changes. However, Ireland’s MNE export base is expected to remain relatively resilient, thanks to its role as a pharmaceutical export platform for both the EU and US1, the specialised nature of its products, and potentially the ability of firms to absorb some tariff costs through their relatively higher profit margins.Indigenous firms, by contrast, primarily focus on the EU and UK markets. Those exporting to the US tend to be larger, more productive and more geographically diversified, increasing their ability to adapt to the tariff shock. They employ over 120,000 workers, with close to 10,000 tied to US export activity2.This sectoral breakdown informs the current economic outlook. The first half of the year demonstrated resilience, with robust consumption and investment, but headwinds persist. Current projections anticipate a slowdown from 2.9 per cent growth this year to just over 2 per cent in the coming years3. Medium-to-long term scenario analysis indicates an economy one per cent smaller relative to a tariff-free scenario. Lower investment is the main driver, with diverted exports to markets outside the US, partially offsetting the direct impact of the tariffs4. We also anticipate a moderate structural shift, with reduced manufacturing activity and increased service sector growth as resources are reallocated in response to these global shocks5.Managing Short-run RisksThe immediate fiscal risk lies in corporation tax receipts, which increased four-fold since 2015. A decade ago, these receipts would have covered three-quarters of government education spending. Last year, they equalled the combined government spending on education, housing, transport, and justice6.While the central expectation is for continued growth in corporation tax7, declining export profits for multinational enterprises may still lead to a reduction in receipts. A particularly concerning aspect is that a large share of this revenue, often referred to as ‘excess’, is not dependent on domestic economic performance, making it susceptible to sudden reduction from broader US policy changes or corporate-structure decisions by a small number of multinational companies.The Summer Economic Statement clearly identifies excess corporation tax as a key fiscal vulnerability, warning that a loss of those receipts would turn the current headline surplus into a multi-billion-euro deficit. Directing excess corporation tax receipts into the Future Ireland Fund is a welcome step towards strengthening public finances. The fund will help address long-term challenges, particularly those related to an aging population and associated increased spending. However, even with this fund, the government will need to secure additional revenue to keep the public finances on a sustainable path.To safeguard Ireland’s public finances, there are two key priorities. First, broaden the tax base as recommended by the Commission on Taxation and Welfare Report8. There are many choices available to government in achieving this resilience-building step, including through reforming tax reliefs, property taxes, consumption taxes, and social-insurance contributions. Second, implement a credible fiscal anchor that keeps government expenditure growth on a sustainable path. This would allow for effective counter-cyclical fiscal policy, for example, by linking net-spending growth (expenditure growth adjusted for tax changes) to the economy’s potential growth rate and a 2 per cent inflation target. This would suggest annual overall net-spending growth of around 4-5 per cent. The Summer Economic Statement proposes an additional €3 billion in spending for this year compared to Budget 2025, implying annual net spending growth exceeding 8 per cent this year. Our analysis of planned spending indicates a significant increase in Ireland's underlying budget deficit, projected to rise from €6.6 billion to €13.9 billion (3.7 per cent of national income9) by 2027. Maintaining this expansionary fiscal policy during a period of economic growth limits our flexibility to respond with budgetary support during a future economic downturn.Higher tariffs and weaker external demand will undoubtedly present challenges for some exposed firms. However, reflecting the vulnerability of corporation tax revenue and the need to contain spending growth, untargeted and widespread fiscal support is neither necessary nor appropriate for responding to the current challenges. Instead, policy should prioritise leveraging existing State agencies to help indigenous exporters that are exposed to the US develop new networks and markets. The EU, representing our extended home market, holds considerable untapped potential, which we should seek to realise through minimising trade frictions.Supporting long-term prosperityLooking to the medium term, maintaining Ireland's attractiveness for foreign investment remains essential. Key infrastructure gaps in water, energy, transport and housing are significant constraints on Ireland's medium-term sustainable growth. Closing these gaps is crucial to keep Ireland not only attractive for foreign direct investment, but also to curb cost of living pressures and unlock the productivity needed for a more diversified export base.Guided by a credible fiscal anchor, capital spending should be prioritised over current spending increases or tax cuts. To maximise the return on capital spending, we must cultivate a thriving local business sector. This includes encouraging entrepreneurship and supporting skills development. A more diverse funding ecosystem, offering tailored financing and equity, will be crucial for supporting high-potential indigenous firms.Timely and effective implementation of the recently published Action Plan on Competitiveness and Productivity will contribute to achieving these goals and ensuring Ireland's future competitiveness10.Beyond domestic measures, strengthening the EU Single Market through more integrated payments landscape and progress towards a Savings and Investment Union, which offers the twin benefits of generating increasing returns for household savings and creating a robust investor base for businesses across the EU.Ultimately, Ireland’s economic resilience hinges on our ability to adapt to a changing global landscape and to leverage the opportunities presented by deeper European integration. While addressing immediate vulnerabilities, it is crucial to avoid broad, short-term fiscal support and instead prioritise investment and delivery of critical infrastructure and a robust fiscal framework - all of which will be essential for sustaining growth and enhancing our economic competitiveness.Thank you for your attention; we welcome your questions. [1] Source CSO External Trade Statistics. Of the €98.9bn pharmaceutical exports in 2024, 44.5 and 43.4 per cent were exported to the US and EU respectively. [2] The number of directly exposed workers are calculated on a trade-weighted basis. [3] Economic outlook refers to Modified Domestic Demand. For further detail, see Quarterly Bulletin, September 2025.[4] CBI model estimates from four-country DSGE model building on Jacquinot et al (2022). The scenario assumes that the US imposes a 15% tariff on all goods from Europe (including Ireland), with no exceptions. The EU (including Ireland) does not retaliate. The US also imposes tariffs on China (35 per cent) and the rest of the world whereby China retaliates and the rest of the world does not. The increase in tariffs is assumed permanent. [5] See The Sectoral Impacts of Tariffs and Trade Fragmentation in the Irish Economy.[6] Net Corporation Tax Receipts of €6.87‘bn and €28.1’bn in 2015 and 2024 respectively. Education spend in 2014 was €9.06’bn. In 2024, government spending on Education (€11.9’bn), Housing (€8’bn), Transport (€3.6’bn) and Justice (€3.8’bn).[7] Cronin (2025) outlines how OECD reforms will increase Irish corporate tax revenues.[8] See Report of the Commission on Taxation and Welfare.[9] National income measure as Modified Gross National Income (GNI*). The underlying budget surplus/deficit is the overall budget position adjusted for excess corporation tax receipts. [10] See Action Plan on Competitiveness and Productivity.

The Central Bank of Ireland today (Tuesday 23 September) hosted the “2025 Payments Seminar: Charting a Future Payments Path for Ireland”.Seminar attendees, from across the public and private sectors, explored how best to achieve the outcomes of the National Payments Strategy and the Eurosystem’s Retail Payment Strategy, across the diverse banking, payments, and fintech sectors in Ireland. The seminar covered the future evolution of retail and wholesale payments, and the importance of continued public-private engagement in moving towards a more efficient, resilient, and integrated payments ecosystem. Speaking at the event, Deputy Governor Vasileios Madouros said: “Payments are the lifeblood of the economy, and innovation in payments – done well and safely – can unlock broader economic benefits. Amid a rapid pace of innovation in the payments landscape, the Central Bank also needs to adapt – we cannot stand still. Our ultimate aim is to ensure that the benefits of innovation are realised and that the risks are managed effectively, maintaining confidence in money and payments throughout this ongoing transition. This is why we chose the theme of our second Innovation Sandbox Programme to be “Innovation in Payments”.  The Sandbox provides an opportunity to further expand engagement between the Central Bank and the private sector in the area of payments. It aims to foster innovative solutions that deliver safer, faster and more inclusive payments for households and businesses, while giving the Central Bank early insight into emerging risks and supervisory questions. Today, we are opening our call for applications to the Sandbox. We welcome applicants at every stage of their development, from start-ups to incumbents, and all points between. We are also interested in receiving applications from partnerships. If you are a firm or a partnership developing a product or service that uses innovative technology to deliver better payments outcomes for consumers of financial services, we invite you to consider making an application.”ENDSNotes to the EditorFurther information on the Sandbox is available on our website, along with the selection criteria and application form. The Innovation Sandbox programme will commence in January 2026 and will take place over six months to allow the innovation develop.

Central Bank of Ireland Governor Gabriel Makhlouf spoke in Paris this morning at the Organisation for Economic Cooperation and Development (OECD) about how demographics, migration and technology will reshape Europe’s workforce. The speech was part of the OECD seminar series ‘The Lectures of the Governor’. Governor Makhlouf said in the face of unprecedented shocks in recent years, the Euro area labour market has held up exceptionally well. However, looking ahead some labour market cooling is expected. While this reflects a cooling of labour demand, Governor Makhlouf said the employment growth slowdown also reflects demographic factors that were initially rather slow-moving, but are now beginning to bite.  Makhlouf said: “Between 2024 and 2027 the euro area working age population is projected to fall by 0.7% (or 1.5 million workers between the ages of 15 and 64).“The longer-term impact is stark: the ‘old-age dependency ratio’ in the euro area, that is, the population aged 65 and over as a proportion of the population aged 15-64, is set to increase sharply from 33.7 in 2022 to 51.2 in 2050.  “An older population with lower consumption and higher savings could place downward pressure on aggregate demand, limiting price growth in certain sectors. This aligns with the “secular stagnation” hypothesis, which has argued that ageing societies are more prone to disinflationary forces. At the same time, a shrinking working-age population will tighten labour markets in the absence of increases in labour force participation rates. This puts upward pressure on wages that feed into services inflation. Moreover, as older cohorts consume more health care and age-related services; relative price increases in those areas may become more entrenched. The balance of these effects is hard to predict, but one potential outcome is higher structural inflation in labour-intensive, non-tradable sectors (i.e. services), even as weak aggregate demand keeps headline inflation subdued. This creates an environment in which inflation dynamics are increasingly segmented, complicating the job of central banks that aim to stabilise prices economy-wide.” Governor Makhlouf said that with shrinking populations, increasing labour force participation is a necessary part of the solution. “We also need to look beyond the traditional definition of working age population as 15-60/64 years of age and boost participation in the post-60/65 population. In a world of longer lifespans and health spans, sustaining living standards will need people to work beyond what is currently considered ‘typical’ retirement age,” Makhlouf added. Governor Makhlouf said that an ageing population, declining fertility and shrinking work forces will drag on employment growth and therefore economic growth in the coming decades, with migration only offering a partial – albeit important – solution to the challenge.  He said: “The point here is not so much to get bogged down in population or migration projection scenarios – which, as I said, are highly uncertain, but rather to highlight the extent to which migration can help mitigate the demographic and growth drag from ageing populations and falling fertility rates. This could allow time for governments to develop and implement other policies, mainly around labour force participation and productivity.” On the drivers of productivity growth in Europe, Governor Makhlouf said: “On the policy front, implementing the proposals in the Draghi and Letta reports, mainly around completing the Savings and Investment Union and removing barriers that restrict trade in goods and services in the EU single market, must be a priority. You will not be surprised to hear that this was a topic of conversation at last week’s meeting of EU Finance Ministers and Central Bank Governors.” Governor Makhlouf said that while we are still in the early take-up phase of AI technology, adoption of the technology is historically fast.  He said: “What we have seen so far in terms of the use of AI, including in my own organisation, suggests that it has the potential to disrupt existing employment patterns, both as a substitute for existing labour through the automation of certain tasks and as a complement to existing skills.  Together, this will create new opportunities for workforce growth and productivity gains. We need to prepare now for the changes that are coming. This means, among other things, more flexible labour markets that allow for worker mobility within and between firms, as well as across sectors and occupations. It also means providing training opportunities for workers, both younger and older, to drive upskilling and support transitions to new roles that may not even exist yet.” Concluding his remarks, Governor Makhlouf said: “To sum up, what the data is telling us is that our societies are facing a series of important choices if we want to sustain or improve our future living standards (or, perhaps more accurately, for some of us at least, the living standards of our children and grandchildren).“Our choices are likely to involve improvements in our productivity, an increase in labour market participation and inward migration. In my view a combination of these, they are not mutually exclusive, offer us the most effective route to building the best opportunities for our grandchildren.” ENDSRead Governor Gabriel Makhlouf’s speech in full. Further informationMartin Grant: martin.grant@centralbank.ie / 086 078 7868 Media Relations: media@centralbank.ie

Growing pains: how demographics, migration and technology will reshape Europe’s workforce Lecture at the OECDGood morning and thank you for the invitation to speak here today.1 It is a pleasure to be back at the OECD and to talk about a topic that is rarely far from the top of the policy agenda, namely labour market developments. Whether it is in relation to long-run growth prospects or the drivers of inflation, labour market dynamics play a crucial role.  My speech will today will cover three inter-related topics. First, I will reflect on the resilience of labour markets over the last five years, highlighting the key developments that have seen employment in the euro area grow steadily, despite a sequence of negative shocks.  Next, I will explore how looming demographic challenges, ageing populations, declining fertility and shrinking work forces, will drag on employment growth and therefore economic growth in the coming decades, with migration only offering a partial, albeit important, solution to the challenge. As demographic headwinds bite, finding ways to boost labour force participation and productivity becomes even more important as a driver of economic growth. Despite this, policy reforms to structurally raise participation rates in Europe have been slow in coming. On top of this, recent productivity trends for the euro area are not good.  In the final part of my speech I will discuss how new technologies, and artificial intelligence (AI) specifically, can be harnessed to boost productivity, and how this interacts with some of the labour market dynamics. The Euro Area Labour Market 2019-2025: a quiet championIn the face of unprecedented shocks in recent years, the Euro area labour market has held up exceptionally well. This performance is all the more remarkable when we recall the hysteresis that characterised previous downturns. And it’s why I refer to it as the ‘quiet champion’. The labour market entered the pandemic in good shape. Monthly unemployment in the euro area reached a low of 7.2 percent in March 2020, reflecting steady, if unspectacular, growth since around 2015. Notably, around two-thirds of the expansion of the labour force in the years prior to the pandemic was immigration from outside of the euro area. Around this time, falling unemployment and rising job vacancies were also contributing to tighter labour market conditions, seen as a key driver of wage growth.2 The pandemic triggered an immediate labour market disruption. Labour demand ground to a halt as job openings collapsed. Unemployment peaked at 8.6 per cent in August 2020. However, the euro area’s response differed markedly from other regions, particularly the United States which saw a much larger unemployment spike. The difference reflected the extensive use of job retention schemes across Euro area countries, which maintained employment relationships while reducing working hours. These policies helped to support incomes in the face of an exceptional shock, but also facilitated a smoother recovery once economic activity resumed.By the third quarter of 2021, little more than 18 months after the start of the pandemic, the employment rate in the euro area was above pre-pandemic levels, at 69 per cent of the working age population. Post-pandemic labour market dynamics have, however, proved to be more than just a rebound. Employment has continued to grow despite further shocks such as the war in Ukraine and rising geopolitical tensions, with the euro area employment rate hitting 70.8 per cent in late 2024; unemployment hit an all-time low of 6.2 per cent in late 2024 and has remained around that level since. Several factors contributed to this resurgence. On the demand side, post-pandemic pent-up demand, especially in consumer facing services, boosted the demand for workers. The slow adjustment of real wages – falling by around 2 per cent between 2021 and 20233– was another important factor. As wage adjustment to the inflation surge lagged, this acted as a ‘shock absorber’, making labour more attractive than capital and thereby supporting labour demand.4  ECB analysis points to the combined role of high profit margins and falling real wages in providing financial space for firms to hoard labour during the recovery from the crisis, especially in manufacturing.5On the supply side, the labour force in the euro area increased by over 8 million between 2021 and 2025, growing at an average annual rate of 1.2 per cent.6  This is almost four times the rate of growth we saw prior to the pandemic. And, much like the earlier period, migration has been an important source of workforce growth. Eurostat data shows that almost half of the increase in the size of the labour force is from foreign workers, that is, non-euro area nationals. In addition, foreign workers have also seen a larger increase in their employment rate in recent years, relative to nationals. The combined effects on GDP are large: the ECB has estimated that 4 of the 5 percentage point cumulative increase in GDP between 2019 and 2024 is attributable to foreign workers.  This is a euro area picture. When we look at individual countries, the relative role played by migration and increasing employment and participation rates differs. For example, growth in Italy, with a relatively lower participation rate, has been helped more by higher participation rates of nationals. Whereas the likes of Germany, with a declining working age population, has relied more on an influx of foreign workers to offset the effects of the population ageing. Some countries, like Ireland and Spain have relied on both channels, with higher participation rates and inward migration boosting employment growth in both countries.   I emphasise the migration channel for two reasons. First, assumptions about migration patterns can have a big impact on population growth estimates, as I outline below. Second, in the euro area, migration happens across the skill distribution: there was an almost identical increase in the share of high-skilled migrant and national employment between 2015 and 2023. This suggests that migration also matters for productivity growth.7 I return to this in the next section that looks at longer-term demographic trends.Longer-term demographic trends – where cyclical meets the structuralLooking ahead, at a euro area level some labour market cooling is expected over the current forecast horizon, through to end-2027. The September ECB staff macroeconomic projections have annual employment growth averaging around 0.5 per cent over the next two years, a significant drop-off compared to the recent experience.8Some of this reflects a cooling of labour demand. We are already seeing this in job vacancies, which have declined from their post-pandemic peaks, although at the country level we see cross-country differences in these trends. For example, job postings in Spain and Italy remain around 50 per cent above pre-pandemic levels; whereas in Germany and France, the figure is closer to 15-20 per cent, reflecting more labour market cooling in these countries. The employment growth slowdown also reflects demographic factors that were initially rather slow moving, but are now beginning to bite. I have previously talked about this as the ‘quick-quick’ phase of demographic change: a period when the population structure in many countries will go through a rapid transition phase, culminating in a far larger retired and elderly population, essentially an inversion of the population pyramid that has characterised many developed countries for decades. Between 2024 and 2027, the euro area working age population is projected to fall by 0.7 per cent (or 1.5 million workers between the ages of 15 and 64).  Some countries see large declines, for example Latvia (-4.8 per cent), Lithuania (-3.4 per cent), Greece (-2.6 per cent), Portugal (-2.1 per cent), Germany (-1.5 per cent) and Austria (-1.3 per cent). Even among those countries treading water – such as Belgium, France, Spain, the Netherlands, Finland and Cyprus, all start to see their working age populations decline from 2027 onwards. The longer-term impact is stark: the ‘old-age dependency ratio’ in the euro area, that is, the population aged 65 and over as a proportion of the population aged 15-64, is set to increase sharply from 33.7 in 2022 to 51.2 in 2050.  These trends will exert varying, and sometimes contradictory, effects on inflation. An older population with lower consumption and higher savings could place downward pressure on aggregate demand, limiting price growth in certain sectors. This aligns with the “secular stagnation” hypothesis, which has argued that ageing societies are more prone to disinflationary forces. At the same time, a shrinking working-age population will tighten labour markets in the absence of increases in labour force participation rates. This puts upward pressure on wages that feed into services inflation. Moreover, as older cohorts consume more health care and age-related services; relative price increases in those areas may become more entrenched. The balance of these effects is hard to predict, but one potential outcome is higher structural inflation in labour-intensive, non-tradable sectors (i.e. services), even as weak aggregate demand keeps headline inflation subdued. This creates an environment in which inflation dynamics are increasingly segmented, complicating the job of central banks that aim to stabilise prices economy-wide.Returning to demographic trends, the workforce in Ireland is also ageing, although the trend somewhat lags what we see in other European countries. There are two main reasons for this. First, relatively higher fertility rates during the early-2000s will continue to support growth in the working age population in the near-term.9  However, rapidly falling fertility rates since then, Ireland’s fertility rate was 1.5 in 2023, down from almost 2 in 2003, and converging on the EU average of 1.4, means that from the mid-2030s onwards, Ireland has one of the fastest ageing populations in Europe, rapidly closing current gaps in the dependency ratio, when compared to other countries. Central Bank of Ireland analysis projects the long-term growth rate of the economy to slow by 2050 to below half its historic average growth rate observed over the last half century.The second mitigating factor is migration. A recent report by Ireland’s Department of Finance shows how inward migration has been central to Ireland’s growth story. Over the period 1995-2020, all European countries saw an increase in the share of international migrants in their population, but Ireland’s trajectory stands out: from just over one-in-twenty international migrants in the population in 1995, by 2020 this was one-in-five, similar to figures for Austria, Germany and Sweden.  As the report notes, while it can have large impacts, net migration is hard to predict, and, in the case of Ireland at least, it has been historically under-predicted. However, even baseline assumptions of net migration returning to pre-pandemic levels of around 40,000 per year sees Ireland’s labour force growth stay in positive territory through to 2047. In a low migration scenario – just under half this level – the labour force starts to contract much earlier, from 2041 onwards.The point here is not so much to get bogged down in population or migration projection scenarios – which, as I said, are highly uncertain – but rather to highlight the extent to which migration can help mitigate the demographic and growth drag from ageing populations and falling fertility rates. This could allow time for governments to develop and implement other policies, mainly around labour force participation and productivity, as I discuss in the final section of my speech. Some final thoughts on migration. The preceding discussion focuses on the direct impact of migration, that is, on numbers in work. However, as OECD research, among others, has shown, migration supports growth beyond direct effects. This includes the potential for positive net fiscal impacts, i.e. taxes and contributions that migrants pay compared to the benefits and public services they receive – fostering trade linkages and contributing to job creation and entrepreneurship. And while migration can offset some of drag on economic growth from unhelpful demographic dynamics – as well as helping to smooth out cyclical labour market fluctuations, we cannot ignore the growing political and social resistance to immigration in many countries. For me it emphasises the importance of robust evidence and building a narrative that is based on facts. Research has shown that perceptions about migration can be wide of the mark, be it about the number and characteristics of migrants, or their economic contribution to society. It is important that decision makers continue to have a solid evidence base on the impact of migration on our economies, including how it interacts with demographic trends. OECD research and analysis provides a valuable evidence base to support effective decision-making.Shrinking not sinking10Migration can mitigate some of the effects of the coming demographic changes, but it cannot push back the tide. In this section, I now want to look at other how increasing labour force participation and productivity growth can help.As I have said previously, with shrinking populations, increasing labour force participation is a necessary part of the solution. For the working age population, it is important that reforms to tax and benefit systems remove disposable income cliff-edges and tax wedges that can impinge on incentives to work. In this regard, ongoing OECD research on how tax and benefit systems affect incentives to work provide an important public policy role.We also need to look beyond the traditional definition of working age population as 15-60/64 years of age and boost participation in the post-60/65 population. In a world of longer lifespans and health spans, sustaining living standards will need people to work beyond what is currently considered ‘typical’ retirement age. A recent OECD report on making the labour market work for older workers puts it well: “To sustain living standards and address structural labour shortages, many countries will need people to work beyond 60 or 65. This requires labour market policies and employer practices that support the hiring, retention and most importantly the employability of mid-to-late career workers. Employers, employees, governments and social partners all have a role in promoting lifelong learning, improving job quality and promoting healthy workplaces to ensure the employability, well-being and economic contribution of older workers in an evolving world of work.”The impact of increased labour force participation in the post-60/65 population is potentially large. Take the old-age dependency ratio as an example. Defining the working age population as 15-69 instead of typical 15-64, and taking Eurostat’s current population projections, the euro area dependency ratio in 2050 is 36.6 instead of 51.2; in Ireland it ‘falls’ from 43.2 to 29.1.11 To put these changes in context, allowing for a ‘high migration’ scenario in population projections results in a relatively small decrease in the euro area 2050 dependency ratio, to just 48.9; for Ireland, it falls to 40.8.12 Shifting our perceptions of the working age population can alleviate some unpleasant demographic arithmetic. However, given relatively lower participation rates in general for older workers, these effects likely represent the upper-end of potential upside scenarios to raising participation rates. Having said that, labour force participation rates have increased for the 65-69 age group in recent years, from 13 to 18 per cent in the euro area between 2019 and 2025, and from 23 to 30 per cent in Ireland over the same period. For comparison, the participation rate of 65-69 year olds in the US in 2024 was 33.4 per cent.Thus far, my remarks have focused on the role of the size of the working age population in growth. I will finish with a brief discussion on the other fundamental growth driver, namely productivity. In previous speeches I have highlighted the drivers of weak productivity growth in Europe, and policies to try and improve it. On the policy front, implementing the proposals in the Draghi and Letta reports – mainly around completing the Savings and Investment Union and removing barriers that restrict trade in goods and services in the EU single market – must be a priority. You will not be surprised to hear that this was a topic of conversation at last week’s meeting of EU Finance Ministers and Central Bank Governors.But here I want to talk specifically around developments in AI. We are still in the early take-up phase of a technology that is itself rapidly evolving. But it is already clear that AI adoption rates are faster compared to historical episodes of new technology roll-outs, such as the advent of the personal computer.  What we have seen so far in terms of the use of AI, including in my own organisation, suggests that it has the potential to disrupt existing employment patterns, both as a substitute for existing labour through the automation of certain tasks and as a complement to existing skills.13 Together, this will create new opportunities for workforce growth and productivity gains. We need to prepare now for the changes that are coming. This means, among other things, more flexible labour markets that allow for worker mobility within and between firms, as well as across sectors and occupations. It also means providing training opportunities for workers – both younger and older – to drive upskilling and support transitions to new roles that may not even exist yet.In many ways, this is revisiting the ‘flexicurity’ debate in Europe. Speaking at the OECD, many of you will be familiar with the concept, but flexicurity is essentially about balancing flexibility for employers and security for workers so that firms and workers can adjust efficiently to economic changes and new technologies, while also maintaining social inclusion and competitiveness.14In the early-2000s, flexicurity became synonymous with labour market structural reforms.15 As you will have seen from our September decision, the ECB’s Governing Council considers it important for governments to adopt growth-enhancing structural reforms that can strengthen the euro area economy in the current environment. In the context of AI, and given the role of start-ups in driving innovation historically, we must reduce both bureaucratic and financial hurdles to starting, and scaling-up, a recurring theme in both the Draghi and Letta reports.  Reforms that align and streamline hiring procedures across the euro area will help to minimise risks to firms of adopting new technology, as well as encouraging greater cross-country worker mobility, which will be particularly important for high-demand digital or AI skills. Related to this, mutual recognition of skills and aligning this to the national university and vocational training programmes at the country level will help to balance supply and demand for skills at a European level. Better coordination around the passporting of worker benefits, be it pensions, training credits or even health insurance – would also encourage mobility across firms, sectors and countries. As AI shifts the demand for skills, active labour market programmes that focus on reskilling, not just younger, but also mid-career workers, linking back to my earlier discussion – will be important. ConclusionDespite a series of negative shocks in recent years, employment in the euro area has steadily grown, driven by strong post-pandemic demand and increased labour force participation, bolstered by inward migration. Looking ahead, demographic shifts will slow employment growth. Migration offers a partial solution, but the dividend from raising labour force participation rates is arguably greater. And, we need to be thinking about participation in the context of new generations living longer and healthier lives.           Raising productivity growth will be fundamental for sustaining living standards. The roll-out and rapid adoption of AI has led to much hype about its productivity promise, but the eventual impact remains highly uncertain.  Nonetheless, flexible labour markets and proactive reskilling of workers across the age distribution will be essential to maximise the productivity enhancing potential of these new technologies.To sum up, what the data is telling us is that our societies are facing a series of important choices if we want to sustain or improve our future living standards (or, perhaps more accurately, for some of us at least, the living standards of our children and grandchildren). We could of course just accept that living standards will worsen but I see little evidence that poorer living standards are likely to be tolerated by the majority of our citizens. I suppose we could also see an increase in fertility rates but I am not sure this would solve the challenge on its own and, on the evidence, that would require a significant reversal in recent trends. Our choices are likely to involve improvements in our productivity, an increase in labour market participation and inward migration. In my view a combination of these, they are not mutually exclusive - offer us the most effective route to building the best opportunities for our grandchildren. I do not suggest that this will be straightforward. To help us to choose well, we will need researchers and organisations such as the OECD to set out the facts in an accessible way and enable informed choices to be made by policymakers, and which can be understood by our citizens. [1] Thank you to Rea Lydon, Daragh Clancy, Rob Kelly and Conor O’Shea for their help in preparing these remarks.[2] See, for example, the discussion on wage growth dynamics and labour market tightness in the December 2019 Eurosystem macro projections. In 2014, there were more than ten unemployed persons for each job vacancy; by 2019, this had fallen to around four unemployed persons for each job vacancy. Despite an initial collapse in job vacancies at the onset of the pandemic, the post-pandemic rebound would see this ratio almost halve again.[3] Monitoring wage dynamics after the inflation surge was important for monetary policy makers concerned about ‘second round effects’ that could drive inflation persistently about target. See for example, my November 2021 remarks “Inflation dynamics in a pandemic: maintaining vigilance and optionality”, where I highlight this risk. The development of more forward-looking and real-time wage trackers – such as the ECB Negotiated Wage Tracker and the Indeed Wage Tracker, developed by the Central Bank of Ireland and the jobs site Indeed – have provided crucial information on wage dynamics.[4] On real wage dynamics during the inflation surge, see President Christine Lagarde’s 2025 speech at the Kansas Fed Symposium in Jackson Hole, Wyoming.[5] One of the flip sides of labour hoarding is lower productivity growth, measured as output per worker. Understanding the reasons for weak productivity during the post-pandemic recovery was a key issue for the Governing Council in recent years. For more on this, see Chapters 2 and 3 of the ECB/Eurosystem 2025 Strategy Review Occasional Paper “A strategic view on the economic and inflation environment in the euro area”.[6] For context, this is only marginally lower than the average annual growth rate of the US labour force between 2022 and 2024. With euro area unemployment rates changing little over this period, increases in the labour force map almost directly to increases in employment.[7] Beyond productivity effects, the concentration of migrant workers in certain sectors is also notable. For example, healthcare in Ireland is a case-in-point. Government statistics (2023) show that almost one quarter of nurses and midwives were from outside Ireland, while more than 7 in 10 new doctors registered in 2022 were trained abroad.[8] The slowdown in employment growth is not unique to Europe. For example, the IMF WEO (April 2025) has employment growth in the United States at 0.5 per cent in 2026, in part due to a large slowdown in inward migration. This is down from a 2021-23 average of almost 3 per cent. [9] The fertility rate measures the number of live births per woman. See Eurostat (2025) for more on fertility statistics and trends. [10] This catchy title is from the Economist magazine’s September 13th, 2025 edition. [11] I use Eurostat’s EUROPOP23 calculations from March, 2023.[12] The ‘high migration’ scenario assumes 33 per cent more immigration than in the baseline from non-EU countries in each year covering the projection horizon. For the euro area, the baseline assumption is for approximately net 1 million non-EU migrants each year from 2026 onwards, down from almost 4 million in 2022, a figure significantly boosted by Ukrainian’s fleeing the war with Russia. For comparison, net immigration into the EU from 2015-19 averaged 1.4 million per year.[13] For more on this, see, amongst others, Anthropic (2025), Kazinnik and Brynjolfsson (2025), Babina and Fedyk (2025), Hampole et al. (2025) and Agrawal, Gans and Goldfarb (2025).[14] For OECD publications on the topic, see, for example “Flexicurity and the Economic Crisis 2008-2009: Evidence from Denmark” (Eriksson, 2012). The 2021 OECD Economic Survey for Denmark also notes how “Denmark’s well-functioning “flexicurity” facilitates reemployment of workers displaced by the energy transition.”[15] See, for example, the 2007 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on “Towards Common Principles of Flexicurity”.

The Macroprudential Mortgage Measures Ten Years on: Taking Stock1Cantillon Lecture, at the 48th Dublin Economics WorkshopTwenty years ago, Ireland was in the midst of an unsustainable, credit-driven property boom, rooted in weak lending standards. Those shaky macro-financial foundations, amplified by underlying fiscal vulnerabilities, eventually led to Ireland’s financial and subsequent economic crisis. Ten years ago, as the economy was recovering from that crisis, the Central Bank introduced new macroprudential measures to guard against the risk of such an episode reoccurring. Or, as Governor Patrick Honohan put it at the time, to “protect the new generation [that is] establishing households – and the nation at large, from the risk of a repetition of what happened before”.2The introduction of the measures did not happen in a vacuum. At an international level, the global financial crisis led to widespread reforms to the regulatory architecture, from stronger prudential standards to an enhanced approach to supervision. The post-crisis financial architecture also saw the introduction of a new policy framework altogether: macroprudential policy. This entailed a shift in thinking, by explicitly taking a system-wide lens on resilience and focusing on the interaction between finance and the broader economy.3 The mortgage measures were Ireland’s first macroprudential intervention. Indeed, back in 2015, we were amongst the first European adopters of mortgage market interventions with an explicit macroprudential objective. A decade on, these are now well established tools at a global level. The measures have not been without debate. When they were first proposed, the Central Bank received the highest number of responses to any of our consultations, surfacing a range of strongly-held views amongst the public. This is not surprising. The measures affect people very directly. Buying a house is the most important financial decision that most people will make in their lives. And mortgages are the largest form of borrowing by households. So the measures matter for individuals, and they matter for the economy as a whole. Indeed, I would characterise the measures as being amongst the most important public policy interventions introduced by the Central Bank, both from a macro-stabilisation perspective and from a consumer protection perspective. In that context, now that we have a decade of experience with the mortgage measures in place, I wanted to take this opportunity to take stock of the lessons we have learned over the past decade. How have the measures fared over that period? What have we learned about how they affect the economy, and where do we need to make further progress? And what lies ahead? The why and the howBut let me start with what a brief reminder of the why and the how of the measures. On the why, put simply, they aim to ensure that lending standards in the mortgage market remain sustainable over time. In doing so, they support the resilience of borrowers, lenders and the broader economy. And they seek to prevent the emergence of an adverse and unsustainable feedback loop between credit and house prices.4These can come across as somewhat abstract concepts. But, as we learned in a very painful way in Ireland – the damage of not achieving these objectives is anything but abstract. The costs of the financial crisis on society were very large. These costs were clearly felt by the large number of mortgagors that were over-indebted and found themselves in financial distress. But they were also felt by those not in the mortgage market, because the financial crisis morphed into an economic crisis, affecting everyone in the country. And some of these costs have been persistent. For example, the long-lasting scars of the crisis on the construction sector are still weighing on housing supply today, with significant adverse effects on younger generations. On different metrics, the Irish financial crisis was amongst the most costly, even compared against systemic crises in other advanced economies (Chart 1). And, of course, behind all these numbers are people, for whom the damage of the financial crisis was deeply personal.Chart 1: The costs of the Irish financial crisis were very large, even compared to other systemic crises in advanced economiesSource: Laeven and Valencia (2020), ‘Systemic Banking Crises Database II’. IMF Econ Rev 68, 307–361.This broad lens is important in terms of how we think about the objectives of the measures. Unlike what I sometimes hear, the measures, like all our regulatory interventions, are not there to ‘protect the banks’. They are there to guard against the damaging effects of unsustainable mortgage lending on society as a whole, now and into the future.On the how, the measures effectively constrain the share of new mortgages that lenders can extend at higher levels of indebtedness. But let me highlight three elements of their design in particular.First, there are two limits: one based on the size of the loan relative to borrowers’ income (LTI) and one relative to the value of the property (LTV). These have different, but complementary, aims. The LTI limit acts as a long-term anchor between developments in the mortgage market and household incomes and supports mortgage affordability, while the LTV limit provides a buffer against house price falls and the risk of negative equity. Second, the measures are not designed to act as hard caps. The framework incorporates so-called ‘allowances’, meaning that lenders can extend a share of new lending above the limits. These allowances are important and provide flexibility for individual circumstances to be taken into account by lenders. Because, ultimately, the measures are not there to replace lenders’ own responsible lending standards, they are there to act as system-wide guardrails.Third, there is a differential treatment by borrower type. The evidence is clear that, other things equal, first-time buyers (FTBs) have had a lower default propensity than second and subsequent buyers (SSBs).5 The role of SSBs in housing market dynamics is also very different: as they already own a home, in an environment of rising house prices, they have additional resources available for future purchases and, therefore, a greater propensity to amplify cycles.6 So the LTI limit is set at 4 times income for FTBs, and 3.5 times income for SSBs. The design of the measures has been tailored to the structure of the Irish mortgage and housing markets. And, importantly, that design has evolved since their introduction in 2015, as we have learned more about their operational effectiveness over time, a theme that I’ll come back to later. How have the measures delivered against their objectives over the past decade?So what have we learned about the effectiveness of the mortgage measures in achieving their objectives over the past decade? Analytically, this is not an easy question to answer with precision. The macro-financial benefits of the measures are not directly observable: indeed, they stem from the absence of things, such as unsustainable booms and busts, over-indebtedness or the emergence of widespread financial distress. The benefits of the measures are also long-term in nature: they may not be immediately obvious today, but they can become more evident in times of stress. What we do know is that the broader environment in which the measures have been operating over the past decade has been testing – and, in the second half of the decade, shock-prone. For much of the period, the process of post-crisis balance sheet repair by both banks and households was still ongoing. In the housing market, we have had a persistent shortage of supply relative to demand, putting upward pressure on the cost of places to live, whether to buy or to rent. Halfway through the decade we saw the onset of a global pandemic, followed by the energy crisis triggered by Russia’s invasion of Ukraine, very high inflation and sharply rising interest rates. So what have we learned about the effectiveness of the measures in that environment?7Let me start with resilience. An environment of rising house prices relative to incomes could have created the conditions for a ramp-up in highly-indebted households. Indeed, that was precisely the pattern in the last housing cycle in the 2000s (Chart 2). And we know that it is highly-indebted households that are both most vulnerable to default, and also more likely to cut spending in a downturn, amplifying economic stresses.8 The measures have guarded against such dynamics. Indeed, unlike the last cycle, the increase in house prices has not led to a sharp increase in highly-indebted mortgagors. Mortgage credit has been flowing to the economy in aggregate, but the measures have constrained the emergence of a tail of highly-indebted households.Chart 2: Unlike the last cycle, rising house prices relative to incomes have not led to an increase in highly-indebted borrowersSource: Central Bank of Ireland and CSO.In turn, these more sustainable lending standards have contributed to lower levels of financial distress amongst mortgagors. For a prolonged period, Ireland had much higher levels of new mortgage defaults than the rest of the EU. Even as late as 2019, when the economy had recovered and unemployment was low, new mortgage defaults in Ireland were double the EU average. That gap has now closed, pointing to greater underlying resilience of borrowers (Chart 3). And, if one looks deeper, where we have seen evidence of distress, whether it is those that opted for payment breaks at the start of the pandemic, or those borrowers that did flow into default in the more recent episode of high inflation and rising interest rates, that distress has predominantly manifested in mortgages issued before the financial crisis, at much weaker lending standards (Chart 4).9 Of course, there are limits to how much we can infer from this. Government interventions supported households in response to the big shocks of the past decade – whether the pandemic or the cost of living crisis. But the evidence points to a strengthening of underlying resilience of borrowers and lenders.Chart 3: New flows into mortgage default in Ireland have converged to the euro area average over the past decadeSource: EBA Risk DashboardNote: EU average consists of AT, BE EE,FI,FR,DE,IE,LT,LU,NL, PT, ES & IT.Chart 4: Mortgages that defaulted over 2023-2024 were predominantly issued at weaker lending standards before the financial crisisSource: Central Bank of Ireland.While the mortgage measures have strengthened resilience of new borrowers, the long shadow of past unsustainable lending practices remains, as evident by the cohort of borrowers on long-term mortgage arrears. While we have seen a marked reduction in the number of mortgage accounts in long-term arrears in recent years, there is still more to be done. So we remain focused on arrears resolution. We have continuously challenged regulated entities to do more to support borrowers experiencing financial difficulty, and particularly those in long-term mortgage arrears. When a borrower is in, or facing arrears, our expectation is that regulated entities provide appropriate and sustainable solutions and engage with broader, system-wide solutions, such as mortgage-to-rent or personal insolvency arrangements. And, as part of our modernised Consumer Protection Code, which comes into effect early next year, we have incorporated important amendments to strengthen the Code of Conduct on Mortgage Arrears.What about the impact of the measures on guarding against an adverse feedback look between credit and house prices? Of course, and I need to be very clear on that, the mortgage measures do not, and indeed cannot, target house prices. House prices are affected by a range of factors, most fundamentally the balance between the underlying demand for, and supply of, housing in the economy. What the mortgage measures do seek to achieve is guard against an unsustainable relationship between credit and house prices from emerging, similar to what we saw in the 2000s. That is a subtle distinction, but an important one. Again, analytically, it is not easy to gauge with precision what might have happened in the absence of the measures. Still, there now is a body of evidence that macroprudential measures in the mortgage market reduce house price growth relative to what might otherwise have been the case (Chart 5).10 The measures can also reduce the tail of expectations of future house price increases, which can act as an important amplification mechanism, if market participants borrow on the expectation of rapidly rising house prices in the future. Indeed, in Ireland, we did see a meaningful reduction in the tail of house price expectations upon the introduction of the measures (Chart 6).Chart 5: Cross-country evidence suggests that the introduction of mortgage measures lowers house prices growthSource: Morretti and Riva (2025). Note: Treatment variable is the introduction of borrower-based measures in a given country (LTV or income-based limits). Outcome variable is the growth in the house price index. Shaded areas report 90% confidence intervals.Chart 6: The tail of positive house price growth expectations in Ireland fell after the introduction of the mortgage measuresSource: McCann and Riva (forthcoming).Of course, over the past decade, we have seen continued increases in house prices relative to incomes in Ireland. This begs the question as to the drivers of those house price developments. For me, a good diagnostic is the relationship between house prices and rents: effectively the rental yield. In the period before the financial crisis, house prices increased much faster than rents, leading to a compression in the rental yield. That is consistent with loose credit conditions playing a key role in driving house prices. Over the past decade, however, rents and house prices have both increased significantly, and both have risen faster than incomes (Chart 7). The rental yield has been broadly stable. That is consistent with the underlying factor driving house prices (and rents) being the imbalance between demand and supply for housing (Chart 8). Put differently, while the symptom of high house prices is evident in both the cycle of the 2000s and the current cycle, the underlying diagnosis is very different. And, what we have not had, is unsustainable lending standards further amplifying these house price dynamics.Chart 7: The relationship between rents and house prices is very different to the last cycle, pointing to supply-demand imbalances as the main driver of house pricesSource: CSO and Central Bank of Ireland calculations.Chart 8: Growth in the total housing stock has not kept up with the increase in Ireland’s population over the past decadeSource: CSO and Central Bank of Ireland calculations.Pulling this all together, the measures have played an important role in strengthening resilience of borrowers, lenders and the broader economy over the past decade. They have also guarded against the emergence of an adverse feedback loop between house prices and credit that we might have seen, had unsustainable lending practices emerged. These are substantial macro-financial benefits, especially in the environment of heightened economic volatility that we have been experiencing. Weighing benefits and costsOf course, as policymakers, we do not aim for resilience at any cost. That would not serve society well. Like all policy interventions, the mortgage measures entail both benefits and costs from the perspective of the economy as a whole. Our job is to balance these. Conceptually, the mortgage measures can entail economy-wide costs through different channels.11 For example, they can weigh on aggregate consumption through the required increase in savings by prospective homeowners to access mortgage finance or through the impact of the measures on house prices and, therefore, household wealth. There are also potential channels to business activity too. For example, small businesses often post residential property as collateral to access finance. So, by dampening house price growth, macroprudential measures can weigh on business borrowing and activity. Beyond those aggregate effects, we are very conscious that the measures have particular effects on certain segments of the population, especially some potential first-time buyers.12It was precisely because of the balance between benefits and costs, which we continuously aim to strike, that we recalibrated the measures in 2022, with a focus on first-time buyers. This was an important, and difficult, decision by the Central Bank, so let me elaborate briefly on the reasons. The mortgage measures, and especially the LTI limit, had become increasingly binding over time, particularly for first-time buyers, amid the continued growth in house prices relative to incomes (Chart 9). Now, if house prices are rising faster than incomes because of weakening lending standards or unsustainable credit dynamics, the fact that the measures are becoming more binding is a feature, not a bug: they are doing their job. But if house prices are rising faster than incomes due to structural factors – for example, underlying shifts in the supply of housing – that can affect the cost-benefit calculus of the calibration of the measures.Chart 9: Amid rising house prices relative to incomes, the measures had become very binding for first-time buyersSource: Central Bank of Ireland. In our analysis, part of the increase in house prices relative to incomes since the introduction of the measures had been due to structural factors. The recovery in housing supply had been slower than we had expected upon the introduction of the measures. Indeed, a more persistent pattern was becoming apparent, with fewer homes being built, for a given level of house prices relative to incomes, compared to the past (Chart 10), implying a gradually increasing cost of the measures.Chart 10: Since the financial crisis, fewer houses are being built, for a given level of house prices relative to incomesSource: CSO, PTSB/ESRI, Central Bank of Ireland calculations. Note: Completions prior to 2011 have been obtained by taking total estimates of (ESB) electricity connections and removing average number of connections in each year that are unrelated to dwelling completions.The flexibility embedded in the measures through the allowances meant that the framework had been able to mitigate the effects of these slow-moving changes over time. But we also wanted to ensure the measures were fit for the future. In that context, and given a broader strengthening of resilience of borrowers and lenders over the same period, we judged that we had some policy space to ease some of the costs of the measures, without disproportionally eroding their benefits. So we increased the LTI limit for FTBs from 3.5 to 4 times incomes, partly offset by a reduction in the allowances at the same time. We also made some other important adjustments, such as simplifying the framework for allowances and switching the differential between borrower types from the LTV limit to the LTI limit. These all reflected lessons learned over time around the operational effectiveness of the measures. As you would expect, we have been evaluating carefully the impact of these targeted adjustments. For example, some of the research we have conducted on the borrower-level impact of the changes points to some easing of costs through an increased probability of first-time buyers buying a newly-built property as well as greater access to mortgage finance by younger households.13 At the same time, the analysis also points to certain borrowers in Dublin purchasing more expensive homes following the recalibration, without that necessarily being explained by the quality characteristics. And while those borrowers account for around 2.5% of total market activity, this highlights some of the very real trade-offs that we face in considering the calibration of the measures. As I mentioned, that was not an easy decision for the Central Bank. Ultimately, though, it was a manifestation of the fact that we always seek to weigh the benefits and costs of our interventions, based on evidence, from the perspective of the public good. Deepening our understanding – priority areas While we have learned a lot over the past decade, both from our own experience and the experience of others, deepening our understanding of the impact of the measures is a continuous process. From a policymaker’s perspective, I wanted to highlight two priority areas in particular. The first relates to the analytical framework for weighing the costs and benefits of the measures. This applies to macroprudential policy overall, given that is still a relative ‘young’ discipline. By comparison, though, over the past 15 years, we have made substantial progress in developing a framework for assessing the benefits and costs of different levels of bank capital.14 For interventions like the mortgage measures, no such widely-accepted analytical framework exists globally. At the Central Bank, we have been building our capabilities in this area in recent years. For example, we have augmented some of our macroeconomic models to incorporate transmission channels for the mortgage measures, allowing us to better assess the trade-offs.15 We have also conducted research that seeks to compare the costs of the measures in terms of economic activity in the central case with the benefits in terms of reducing volatility of output.16 These are good starting points, though I would say that, at this stage, they are still nascent attempts to get us towards a comprehensive framework for weighing benefits and costs. There are also important conceptual questions that we need to tackle to make progress in this area. For example, most of the macroeconomic costs of the mortgage measures operate on the demand side of the economy, so should not have a permanent effect on the level of output. By contrast, the costs of financial crises are persistent, with some studies pointing to permanently negative effects on the size of the economy.17 Another example is that the benefits of the measures stem from making low probability events less damaging, a bit like an insurance payout. Whereas the costs of the measures are there in central expectation, similar to the premium on insurance. Unlike (most) insurable events, though, we cannot have a firm grip on the probabilities of these tail events, given how infrequent financial crises are. The second area that I would highlight as important to focus our analytical efforts on is the interaction between the mortgage measures and different aspects of the broader housing market. One important dimension is the interaction between the mortgage measures and housing supply. And, specifically, whether the measures affect how responsive supply is to house prices. We know that parts of the country where the mortgage measures have been most ‘binding’, because of higher house prices relative to incomes – are also the parts of the country where we have seen the biggest increase in housing supply (Chart 11). On the face of it, at least, this would suggest that housing supply has been responding to price signals. But this has also been explored more formally, with research suggesting that, accounting for constructions costs, there had been no change in the responsiveness of supply to house prices since the measures were introduced.18 Put differently, lower levels of housing supply than in the past can be explained by the rising cost of construction over time, rather than a lower sensitivity to house prices.Chart 11: Housing supply has been responding to price signals, despite the measures being more bindingSource: CSO and Central Bank of Ireland. Note: Completions per 1,000 pop. = units completed / 1000's of population (per county). Population data based on CSO annual population estimates.Another important dimension is the interaction between the mortgage measures and the rental market. Instinctively, it is natural to think that looser mortgage credit conditions might mean less pressure on the rental market, as more people are owner-occupiers. But, all else equal, more households in owner-occupation can also mean a smaller stock of rental properties available to remaining renters, with an unclear effects on rents. Ultimately, this is an empirical question – but the evidence remains sparse and mixed. Some of our own analysis has found that the introduction of the measures was associated with a modest increase in rental yields in the short term, albeit driven mainly by reduced house price growth, rather than higher rental growth (Chart 12).19 But other studies find a bigger effect of mortgage restrictions on rental growth and also highlight potential dependencies with other aspects of the rental market, such as the presence of institutional investors.20 Chart 12: Estimated impact of the introduction of the mortgage measures on rents and house pricesSource: Yao et al (2025)Overall, while we have learned a lot over the past decade, there is still further to go. I do not want this to come across as of academic interest. These questions matter for policy, and, therefore, they matter for the public that we serve. Ultimately, evidence-based policy is part of our DNA at the Central Bank. So it is a priority for us to continue to deepen our understanding of the effects of the measures, like all our policy interventions. Looking ahead Let me finish off by looking ahead. Of course, especially in light of the current levels of geoeconomic uncertainty globally, it can seem a fool’s errand to make statements about the future with much confidence. But, if I take a step back, my own judgement is that – over the course of the next decade, the environment in which the mortgage measures will operate may well be more challenging than the one that prevailed over the past decade. There’s three reasons for that.First, the financial crisis is now increasingly in the rear view mirror for many. From a political economy perspective, internationally, there is increasing focus on the ability of the financial system to support growth, which risks manifesting as a pro-cyclical turn of the global regulatory cycle. From the perspective of the financial system, the process of post-crisis balance sheet repair is now largely complete and there is greater focus on growth and expansion. From the perspective of the public, naturally, attention is on today’s challenges – including around housing affordability – rather than concerns about the costs of financial crises of the past. Second, domestically, there is, rightly, growing focus on policy measures to increase housing supply.21 This means that, over the next decade, we are likely to see higher housing market transactions – and, in turn, an associated increase in mortgage market activity. With house prices already elevated relative to household incomes, this combination of factors has the potential to create the conditions for rising indebtedness across the household sector, especially if lending standards in the mortgage market were to weaken. Finally, from a broader macroeconomic lens, we are facing a number of ongoing structural shifts, related to geopolitics, fragmentation of the global economy, artificial intelligence, demographics and the increasing frequency of extreme weather events due to climate change. These suggest that the environment for economic activity and inflation (and, therefore, also interest rates) will remain highly uncertain and, indeed, potentially more volatile. Put differently, we are facing a world with the potential for more frequent and larger supply-side shocks, which could test the financial position of households.It is precisely in such a more challenging environment that the benefits of the measures are also likely to be higher. So how do we ensure that they continue to do their job over the next decade? Let me cover three dimensions guiding our approach.First, we will continue to evaluate the measures on an ongoing basis, as we have done to date. If you look at the mortgage measures now, and compare them to when they were first introduced a decade ago, they have not been static. There have been adjustments to their design, to their calibration and to our overall policy strategy.22 This is important. To remain fit for purpose over time, all policy frameworks need to be able to evolve, amid broader structural changes in the economy and the financial system. And the fact that we have made adjustments is indicative that we are – and will remain – responsive to those changes, where justified by evidence. Second, we will continue to deepen our understanding of the benefits and the costs of the measures. To do so, we will not just rely on our own analysis. We also want to engage with external researchers, to benefit from broader perspectives and expertise. More broadly, as I mentioned upfront, when we first introduced the measures, we were amongst a very small number of European countries to have explicit macroprudential measures in the mortgage market. Now, these are a widely employed tool by macroprudential authorities across Europe, so we can also learn from others’ experience. Third, throughout, we will place particular emphasis on engagement, transparency and accountability. This is relevant to all our policy interventions, but it is especially important for interventions like the mortgage measures, which affect people very directly. Actively engaging with, and listening to, a broad range of stakeholders, and being transparent about our judgements and the rationale behind them, are essential foundations for accountability. This is the approach we have taken over the past decade – and our commitment to openness and transparency will remain steadfast into the future. Indeed, that will become even more important if the operating environment does become more challenging over the next decade. ConclusionLet me conclude. I am very conscious that I have spoken about the mortgage and housing markets from a macro-financial lens. But there is a critical societal dimension to the very real challenges people are facing in accessing affordable housing – whether to rent or to buy. At its core, that affordability challenge stems from the imbalance between housing supply and demand. Rightly, therefore, the core focus of public policy is on measures to boost housing supply. As that happens, it is important that dynamics in the mortgage market, which ultimately underpins housing activity, remain sustainable. That is the role of the mortgage measures. Over the course of the past decade, the measures have become increasingly accepted by the public that we serve in Ireland. This is an important foundation, because – looking ahead to the next decade – the environment in which the measures operate may well become more challenging. But that is also when the value of these interventions will be higher. Our focus will be on ensuring that the measures continue doing their job, always weighing their benefits and costs, from the perspective of the public good. Thank you for your attention.[1] I am very grateful to Mark Cassidy, Edward Gaffney, Niamh Hallissey, Patrick Haran, Conor Kavanagh, Gerard Kennedy, Eoin O’Brien, Cian O’Neill, and Maria Woods for their advice and suggestions in preparing these remarks.[2] Honahan (2014) ‘Household indebtedness – rhetoric and action’, address at the Money Advice and Budgeting Service Annual Conference.[3] Makhlouf (2021) ‘Birth, growth and towards maturity: macroprudential policy in Ireland, remarks at the ESRI.[4] For more information, see our macro-prudential mortgage measures framework.[5] See, for example, Kelly et al (2015) ‘Designing Macro-prudential Policy in Mortgage Lending: Do First Time Buyers Default Less?, Central Bank of Ireland, Research Technical Paper, 2015, No. 2 and Giuliana (2019) ‘Have First Time Buyers continued to default less?’ Central Bank of Ireland, Financial Stability Note, 2019, No. 14.[6] See Box 5 in Central Bank of Ireland (2021) ‘Consultation Paper 146: Mortgage Measures Framework Review’.[7] For a summary of insights that can be drawn from the research and analysis carried out by Central Bank staff since the introduction of the measures, see Gaffney et al (2025), 'Borrower-based mortgage measures: lessons from Ireland's experience since 2015', Central Bank of Ireland, Signed Article, 2025, No. 4. [8] For Irish evidence on highly indebted households and default risk, see Lydon and McCarthy (2011) ‘What Lies Beneath? Understanding Recent Trends in Irish Mortgage Arrears’, Central Bank of Ireland, Research Technical Paper, 2011, No. 14, and McCarthy (2014) ‘Dis-entangling the mortgage arrears crisis: The role of the labour market, income volatility and housing equity’, Central Bank of Ireland Research Technical Paper, 2014, No. 2. For Irish evidence on highly-indebted households and spending, see Le Blanc and Lydon (2019) ‘Indebtedness and spending: What happens when the music stops?, Central Bank of Ireland, Research Technical Paper, 2020, No. 14, and Fasianos and Lydon (2021) ‘Do households with debt cut back their consumption more in response to shocks? Central Bank of Ireland, Research Technical Paper, 2021, No. 14.[9] On payment breaks during the pandemic, see Gaffney and Greany (2020) ‘COVID-19 payment breaks on residential mortgages’, Central Bank of Ireland, Financial Stability Note, 2020, No. 5.[10] For Ireland, see, for example, Kelly et al (2018) ‘Credit conditions, macroprudential policy and house prices’, Journal of Housing Economics, Vol 41, and Acharya et al (2022) ‘The anatomy of the transmission of macroprudential policies’, Journal of Finance, Vol. 77, Issue 5. For international evidence, see Richter et al (2019), ‘The cost of macroprudential policy’ Journal of International Economics, Vol. 118, Pogoshyan (2019) ‘How effective is macroprudential policy? Evidence from lending restriction measures in EU countries’, IMF Working Paper, WP/19/45, and Moretti and Riva (2025) ‘The impact of borrower-based measures: an international comparison’ Central Bank of Ireland, Staff Insights. [11] Aikman et al (2021) ‘The macroeconomic channels of macroprudential mortgage measures’, Central Bank of Ireland, Financial Stability Note, 2021, No. 11.[12] See, for example, Gaffney (2019), ‘Mortgage borrowers at the loan-to-income limit’, Central Bank of Ireland, Financial Stability Note, 2019, No. 11.[13] Singh and Yao (2025) ‘The impact of higher LTI ratios: evidence from Ireland’, Central Bank of Ireland, Research Technical Paper, 2025, No. 13.[14] See, for example, BIS (2019) ‘The costs and benefits of bank capital – a review of the literature’, BIS Working Paper, No. 37 and for Irish related research on this topic, see McInerney et al. (forthcoming) ‘Rightsizing bank capital for small, open economies’,  International Journal of Central Banking.[15] Mclearney (2020) ‘Macro-financial linkages in a structural model of the Irish economy’, Central Bank of Ireland, Research Technical Paper, 2020, No 3.[16] See Athanasopoulos et al. (2025), ‘The costs and benefits of borrower based measures – a macroeconomic framework’, Central Bank of Ireland, Research Technical Paper, 2025, No 14 and Banerjee et al. (forthcoming), ‘Income-based tools to mitigate housing market risks: Where might we have been without them?’.[17] See, for example, Furceri and Mourougane (2012) ‘The effect of financial crises on potential output from OECD countries’, Journal of Macroeconomics, vol 34, Chen et al (2019) ‘The Global Economic Recovery 10 Years After the 2008 Financial Crisis’, IMF Working Paper, WP/19/83 and Cecchetti et al. (2009) ‘Financial Crises and Economic Activity” NBER Working Paper, No. w15379.[18] Gunnewig-Monert and Lyons (2024) ‘Housing prices, costs, and policy: The housing supply equation in Ireland since 1970’ , Real Estate Economics, Vol. 52.[19] Yao et al (2025) ‘Mortgage measures and rental yields in Ireland’, Central Bank of Ireland, Staff Insights, No 5.[20] Carro et al. (2022) ‘Heterogeneous effects and spillovers of macroprudential policy in an agent-based model of the UK housing market’ Bank of England Staff Working Paper, No. 976, Castellanos et al. (2024) ‘The aggregate and distributional implications of credit shocks on housing and rental markets’, ECB Working Paper Series, No. 2977, Cima and Kopecky (2024) ‘Housing policy, homeownership and inequality’ TEP Working Paper, No 724.[21] See Central Bank of Ireland (2024) ‘Economic policy issues in the Irish housing market’.[22] BIS CGFS (2023) “Macroprudential policies to mitigate housing market risks – country case study: Ireland,”.

The introduction of the mortgage measures a decade ago has been amongst the most important public policy interventions by the Central Bank, and has played a significant role in strengthening the resilience of borrowers, lenders and the broader economy. The Central Bank has been responsive to the evolving context over the past decade, adjusting the design and calibration of the measures to balance benefits and costs.The environment in which the measures operate is likely to become more challenging over the next decade, but that is also when their benefits are likely to be higher.Deputy Governor of the Central Bank of Ireland Vasileios Madouros delivered the Richard Cantillon lecture at the Dublin Economics Workshop today 19 September 2025.Speaking ahead of the lecture, Deputy Governor Madouros said: “It has now been a decade since the Central Bank introduced the mortgage measures. These have been amongst the most important public policy interventions by the Central Bank, both to avoid damage to the economy as a whole and to protect consumers.“I am very conscious that the measures affect people very directly. Buying a house is the most important financial decision that most people will make in their lives. And mortgages are the largest form of borrowing by households. So the measures matter for individuals, and they matter for the economy as a whole.“I am also very conscious that the benefits of the measures are not directly observable by most people.  Indeed, they stem from the absence of things, like unsustainable booms and busts, over-indebtedness or widespread financial distress. The benefits of the measures are also long-term: they may not be immediately obvious today, but they can become more apparent when shocks hit.” “What we do know, ten years on, is that the mortgage measures have played an important role in strengthening the resilience of borrowers, lenders and the broader economy. It is important not to lose sight of that, especially as we navigate a more shock-prone world.”Weighing benefits and costsDiscussing the Central Bank’s approach to weighing up the benefits and costs of the measures, Deputy Governor Madouros said: “As policymakers, we do not aim for resilience at any cost. That would not serve society well. Like all policy interventions, the mortgage measures entail both benefits and costs from the perspective of the economy as a whole. Our job is to balance these.“Indeed, over the past decade, the mortgage measures have not remained static. We have adjusted them, based on evidence, to balance their benefits and costs, from the perspective of the public good. And we continue to deepen our understanding of their impact, learning from our own experience and the experience of other countries.”Looking aheadCommenting on the future outlook, Deputy Governor Madouros said: “Looking ahead to the next decade, the environment in which the measures operate may well be more challenging than the one that prevailed over the past decade. Memories of the financial crisis are fading, mortgage market activity is likely to increase and house prices are already elevated relative to incomes. This combination of factors has the potential to create the conditions for rising indebtedness, especially if lending standards in the mortgage market were to weaken. “It is precisely in such an environment that the value of the mortgage measures is likely to be higher. Our focus at the Central Bank will be to ensure that the measures continue doing their job into the future, so that dynamics in the mortgage market – which ultimately underpins broader housing activity – remain sustainable over the long term.”ENDSFurther InformationElaine.scanlon@centralbank.ie 087 2136313 

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Warning:Unauthorised Retail Credit FirmUnauthorised Firm NameSeaconview Designated Activity Company (Clone)Websitehttps://seaconviewdesignatedactivitycompany.comPhone Numbers Used+44 2897 032013+353 89 985 5958Email address usedinfo@seaconviewdesignatedactivitycompany.com Authorisation in IrelandSeaconview Designated Activity Company (Clone) is not authorised to provide Retail Credit services in Ireland.Additional InformationThis scam is an example of an ‘advanced fee fraud’, where a payment is sought upfront prior to providing a loan. The loans are never provided.This fraudulent firm has cloned the details (name, address, LEI number and CRO number) of a Central Bank of Ireland authorised firm and has been seeking to pass itself off as the legitimate firm, Seaconview DAC (CBI00144391), in order to deceive Irish consumers. It should be noted that there is no connection whatsoever between the Central Bank authorised firm and this scam entity. Further InformationThis entity shares the telephone numbers with another fraudulent entity that has also purported to offer retail credit  in Ireland without authorisation from the Central Bank of Ireland. The Central Bank of Ireland issued a warning notice  concerning this fraudulent entity:ABR Chesapeake Ireland IV plc (March 2025)Notes:Any person wishing to contact the Central Bank with information regarding such firms / persons may telephone (01) 224 5800.For more information on how to protect yourself from financial scams, please visit www.centralbank.ie/financialscams The name of the above firm is published under section 53 of the Central Bank (Supervision and Enforcement) Act 2013. 

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Modified Domestic Demand (MDD) is revised up for 2025 to 2.9 per cent but growth expected to slow to 2.3 per cent per annum on average in 2026 and 2027.Risks that further geoeconomic fragmentation could result in lower inward investment over time and more immediate challenges to the public finances given the reliance on large corporation tax revenues.Policies to tackle constraints to domestic growth - by closing infrastructure gaps in water, energy, transport, and housing – will also build resilience against the long-term challenges posed by geoeconomic fragmentation. The Central Bank has today (18 September 2025) published its third Quarterly Bulletin of 2025. On the launch of the Quarterly Bulletin, Robert Kelly, Director of Economics and Statistics said:   “As the new trans-Atlantic economic relationship begins, businesses, households and policy-makers in Ireland continue to adapt to the changed environment.  The economic outlook is not as favourable as it would have been had US tariffs not been introduced, but the tariff rates covering EU-US trade are lower than had been expected earlier in the year.  Policy uncertainty still remains relevant both domestically and globally and Irish economic growth is expected to be impacted.”“The strength of headline GDP in the first half of 2025 was partly due to multi-national enterprises responding to potential US tariffs by front-loading exports.  However there was also an underlying impetus to exports arising from the expanding pharmaceutical industry in particular, as well as growth in non-pharma exports.  Looking ahead, the manner in which affected MNEs react to increased costs due to higher tariff and non-tariff barriers will influence key indicators of the Irish economy. Rising production and distribution costs could eventually weigh on the profits of MNEs in Ireland over the medium term, having a negative impact on corporation tax revenues compared to recent trends. Upward revisions to government expenditure combined with an expected slow down in tax revenue growth (excluding excess corporation tax) is expected to result in the underlying budget deficit deteriorating further out to 2027.”“Over the longer term, particularly if tariffs are accompanied by broader changes to US tax and industrial policies, there is a risk of lower investment flows and restructured MNE value chains. This could hinder the growth of economic activity and employment in Ireland, further exacerbating challenges for the public finances.  In a Signed Article  also published today, staff research points towards the prospect of Irish national income being in the region of 1 per cent lower over the long-term with the new US tariff regime now in place.  The potential impact differs across sectors, with models pointing to more negative outcomes for the foreign-dominated pharma and chemicals sectors, while the food and beverage sector is the most significant of the domestically-dominated sectors affected.  The analysis suggests that tariffs of the magnitude now being introduced are unlikely to lead to any significant reduction in existing foreign investment, but the potential loss of Ireland’s attractiveness as an export platform for new US foreign direct investment remains a key risk over the medium term.”The economy is projected to continue to grow despite new tariffs on EU-US trade, more fragmented international trade generally and continued high levels of uncertainty.  Modified Domestic Demand (MDD) grew by 3.8 per cent in the first six months of 2025 compared to the same period of 2024, with employment up 2.8 per cent.  The outturn for the first half of 2025 indicates some positive momentum in economic activity, albeit that some signs of easing are emerging. The private sector job vacancy rate has fallen and growth in economic activity in the domestically-oriented sectors of the economy has been moderate in the first half of 2025. Overall, the positive outturn for the first half of 2025 along with additional government expenditure announced in the Summer Economic Statement has contributed to an upward revision to the MDD forecast for 2025 to 2.9 per cent, with MDD forecast to grow by 2.2 per cent and 2.4 per cent in 2026 and 2027, respectively. Continued expected growth in real disposable incomes over the forecast horizon, amid a stable labour market, supports the forecast for continued growth in consumer spending of over 2 per cent per annum out to 2027.  With employment growth expected to slow to just under 2 per cent, a marginal rise in the unemployment rate is anticipated from its current levels of around 4.5 per cent, yet still remaining below 5 per cent.  Domestic inflationary pressures are forecast to remain contained, although food price inflation has been relatively high lately due mainly to tighter supply conditions in European beef markets.  Food price inflation is forecast to moderate, however, whereas services inflation is expected to stabilise around 2.7 per cent out to 2027 given the strength of domestic demand, leading overall HICP inflation at 1.4 per cent in 2026 and 2027.The outlook for domestic investment has been revised up for 2025 but the overall outlook is muted and forecasts are particularly sensitive to the performance of the MNE-dominated parts of the economy. Modified investment is forecast to grow in 2025 by 2.4 per cent, compared to the small decline of 0.6 per cent projected in QB2. The main reason for the more positive expected outturn in this forecast is revisions to historical investment data published by the CSO in July and more positive high-frequency soft data on business investment activity. Within modified investment the projection for housing completions has been revised downwards for 2026 and 2027 as constraints in water and energy infrastructure are expected to be marginally more binding on the number of dwellings that can be delivered in those years. Housing completions are forecast to stand at 32,500, 36,000 and 40,000 in 2025, 2026 and 2027, respectively. Offsetting weaker projected new housing construction, the forecasts for improvements and non-residential building and construction have been revised up modestly across the forecast horizon. The underlying budget deficit (excluding estimated excess corporation tax) is now projected to be larger out to 2027 when compared with the previous Bulletin, reflecting additional expenditure measures announced by Government. The underlying general government balance (GGB) is estimated to have recorded a deficit of -2.1 per cent of GNI* in 2024. Latest Exchequer data shows growth in income tax and VAT, while remaining robust, has moderated in the first eight months of 2025, while cumulative corporation tax (CT) receipts are only marginally above the level for the same period last year (excluding receipts linked to the Apple State aid case). Gross voted expenditure has recorded strong growth so far this year, and the expenditure ceiling for 2025 has been revised upwards reflecting additional current and capital spending. As a result, the outlook for government expenditure growth for 2025 has been revised sharply upwards and an underlying deficit of -3.3 per cent is now anticipated for this year.  Over the coming years, spending growth is expected to remain elevated, particularly capital spending, while estimates of underlying revenue growth moderate in-line with overall economic activity.  As a result, the underlying GGB is projected to deteriorate further to -3.7 per cent of GNI* by 2027.The threat of a further escalation of global trade tensions persists and means that risks to the current forecasts for economic growth are tilted to the downside.  Delays in alleviating key infrastructural deficits in water, energy and housing would worsen capacity constraints that are already having a negative impact on economic activity, further limiting the growth potential of the economy and possibly putting upward pressure on inflation.  Risks to the public finances are firmly to the downside owing to the vulnerability of government revenue to a loss of corporation tax and the pattern of persistent overruns in public expenditure.Addressing the long-term challenges posed by geoeconomic fragmentation requires tackling the same constraints to domestic growth - by closing infrastructure gaps in water, energy, transport, and housing. This is essential to improve Ireland’s attractiveness for foreign direct investment and to contain the costs of living and doing business. Efficient public infrastructure delivery, achieved not only through increased capital expenditure but also reforms that would accelerate project timelines, can crowd-in private investment. However, the necessary rise in construction activity—a sector with below-average productivity—poses short-term risks of higher unit labour costs and inflation. To mitigate these risks, linking public capital spending to innovative delivery methods and incentivising scale in investment projects is crucial. Such initiatives can support productivity, ease inflationary pressures, and maximise the economic benefit from public investment.  More generally, facilitating greater business dynamism and more efficiency in capital re-allocation as young firms emerge will also contribute to higher productivity growth.Reducing the risks to the public finances from an excessively narrow tax base has become more critical, given the reliance on corporation tax receipts from a small number of MNEs, which may be more vulnerable in light of geoeconomic fragmentation. Committing to a credible fiscal anchor that ensures sustainable growth in net government expenditure remains essential. This would establish effective counter-cyclical fiscal policy, enabling the public finances to support the economy as needed, and strengthen the public finances over time. Growth in government expenditure, especially recurring current expenditure, needs to be accompanied by a sustainable revenue-raising base given the vulnerabilities arising from persistent spending overruns and underlying budget deficits.  Additionally, broadening the tax base is necessary to create the fiscal and economic capacity to increase public capital investment as envisaged in the National Development Plan and to cover the rising costs that are emerging to sustain public services at their existing levels.Previous Quarterly Bulletins are available to view on the Central Bank’s website.Further informationMedia Relations: media@centralbank.ie Úna Quinn: una.quinn@centralbank.ie / 086 067 4008Elaine Scanlon: elaine.scanlon@centralbank.ie / 087 213 6313

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