Friday 20 April 2018

Let the good times roll . . . but be aware they won't be here forever

Those engaged in election manifestos must pay caution to budget policy

Michael Noonan
Michael Noonan
Colm McCarthy

Colm McCarthy

The stream of good economic news in Ireland shows no signs of letting up. The budget deficit for 2015 will come in under target, due mainly to healthy growth in tax revenues, while unemployment continues to fall. But the external developments which have fuelled the turnaround are not guaranteed to last. When things improve so quickly it is foolish to extrapolate: the good times could roll a little longer but they will not roll forever.

The European Central Bank's governing council last Thursday disappointed the markets by easing monetary policy less than had been expected.

The ECB has a target inflation rate of 2pc and has failed to meet it since the sovereign debt crisis struck in 2012. The cumulative under-shoot means the general price level in the Eurozone is already 4pc below where it should be relative to 2012.

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