Policy shouldn't make inflation fight 'more difficult', says Central Bank governor

Central Bank Governor Gabriel Makhlouf speaks to Ronan Smyth

Central Bank of Ireland governor Gabriel Makhlouf said he was 'concerned' that the Government felt it was necessary to spend much more in the Budget than previously indicated saying it increases “increases the risk of domestic inflation”.

With inflation continuing to slow and the European Central Bank (ECB) announcing another interest rate cut, Ireland finds itself in a much better position than many of its eurozone peers, but the Governor of the Central Bank of Ireland has warned that we have to ensure “we're not making things more difficult for ourselves” when it comes to dealing with inflation given the current capacity constraints in the economy.

Gabriel Makhlouf's comments come following the Budget earlier this month which increased spending far above what the Government’s own fiscal rules would have allowed despite repeated warnings from the Central Bank, among many other economic institutions, that higher spending could lead to higher rates of inflation.