Central Bank Governor: 'Premature' to assume Trump's impact on economy
Central Bank Governor Gabriel Makhlouf noted that the global economy is 'fragmented'.
The Governor of the Central Bank of Ireland has said it would be “premature” to come to any conclusions as to what the next Donald Trump presidency will do which will impact the economy but what is clear is that the global economy is already “fragmented”.
During his campaign, Mr Trump made tariffs a cornerstone of his economic plans promising a 10%-20% across the board tariff on all goods coming into the US with China being singled out for a potentially higher rate of 60%.
These tariffs will drive up prices in the US and potentially lead to trade wars between countries.
When asked by reporters about the potential impact Mr Trump’s presidency will have on the global economy, Mr Makhlouf said it would be “premature” to come to “conclusions as to exactly what it is that the new US administration is going to do and to start making decisions based on that assumption”.
He noted that the global economy is “fragmented” which has “implications for the economic well being of everybody, as the financial system”.
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"I think we just need to recognise we're in a changing environment which has already changed. The fragmentation of the global economy did not start this year. It's unlikely to conclude next year.
“We're going to live in a much more uncertain, much more volatile world where all sorts of things, not just political decisions, are going to make a difference. How governments respond to other people's decisions is going to make a difference,” he said.
Mr Makhlouf said that Central Bankers will need to be “vigilant”, “observe” what is going on and be ready to make the “necessary decision” in order to deliver on their mandate which is monetary and financial support.
When asked about Ireland’s own upcoming election, and the spending promises being made by various political parties, Mr Makhlouf said he believes all the politicians are aware of his views on the economy and the state of the public finances as all his letters and comments are public.
Mr Mahklouf has repeatedly warned the Government against additional spending in their budgets as they could lead to higher rates of inflation.
The European Central Bank (ECB) is due to meet again next month to discuss another potential interest rate cut as inflation continues to slow. It is widely expected that another rate cut of 0.25% will be announced but Mr Mahklouf says the decision will be dependent on the data that is presented right before the meeting.
"It is reasonable to assume that we're on this downward trajectory when it comes to interest rates. Are we going to cut in December, or are we going to wait till the next meeting? All that will just depend on what data tell us,” he said.
He added that it would take “quite some persuading” for him to agree with a 0.5% reduction in rates.
“The evidence would have to be pretty overwhelming. I am still a believer in a prudent and cautious approach. When the policy is working, we're clearly on track to achieve our target. I don't see why we want to rush to achieve our target,” he said.
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