Makhlouf warns that inflationary measures must be well-targeted

The Governor of the Central Bank of Ireland has warned policymakers against taking only “targeted” and “temporary” measures to tackle rising inflation or make things worse.

I think it’s important that the actions are well targeted,” he told the Oireachtas finance committee on Wednesday. “I would also suggest that the measures should be temporary and I will be cautious about how far I go before possibly actually becoming part of the problem.”

He said fiscal support should target the poorest households and the elderly, who spend a large chunk of their income on food and fuel, prices of which have skyrocketed in recent months.

“Certainly the support – if the state deems it necessary – in these areas should be well targeted and not, in my opinion, broad brush.”

To date, the Irish government has implemented universal interventions such as energy credits and reductions in fuel consumption taxes.

Mr Makhlouf said inflation was likely to rise further due to the ongoing disruption from the war in Ukraine and the recent spate of Covid cases around the world.

Governor Gabriel Makhlouf told Oireachtas’ finance committee that inflation had risen to its highest level since 2000 as high energy costs and supply shortages pushed up consumer goods prices.

However, he added that the latest data did not include key factors driving prices higher.

“[I]It should be noted that these increases in official consumer prices for energy and fuel may not yet fully reflect the developments of the past few weeks and the impact of the conflict in Ukraine,” he said.

“We do not yet understand the full impact of the recent spike in Covid case numbers around the world.”

Irish inflation hit 5.7 percent in February as the economy began to recover from the pandemic and before the full shock of the war in Ukraine hit commodity markets. The average in the euro zone was 5.9 percent.

In a sign of where prices are likely to go when estimates for the euro zone are released on Friday, Germany’s preliminary inflation for this month rose to 7.3 percent from 5.1 percent a month ago – the highest since 48 years.

Mr Makhlouf said he was “concerned” about inflation, noting that the European Central Bank, where he sits on the Governing Council, “whaNo action is required to fulfill the ECB’s mandate to ensure price stability”, which in practice means keeping inflation around 2 percent. Makhlouf warns that inflationary measures must be well-targeted

Fry Electronics Team

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