Central Bank of Ireland governor calls for monetary policy frameworks to adapt to fragmentation-driven supply shocks and highlights the Digital Euro as a resilience priority

The Central Bank of Ireland published keynote remarks by Governor Gabriel Makhlouf to the National Association for Business Economics International Economic Symposium in Dublin, setting out how monetary policy and wider economic resilience measures should respond to a more volatile global environment shaped by geoeconomic fragmentation. He argued that the stalling or reversal of global integration is amplifying uncertainty and market volatility, and that monetary policy must adapt to the new nature, scale and persistence of fragmentation-induced supply shocks. Makhlouf set out four implications for monetary policy frameworks: threats of inflation de-anchoring from both above and below warrant forceful and persistent responses; risk and uncertainty should be incorporated more explicitly; frameworks should be agile enough to allow swift exits from policies when conditions change; and interest rates should remain the default lever, with targeted lending programmes and balance sheet operations useful when policy is constrained by the lower bound. On resilience, he prioritised completing the European Union Single Market, advancing the Savings and Investment Union to help unlock almost EUR 12 trillion in European savings and cash deposits, and addressing the euro area’s lack of a unified pan-European payment rail by using a central bank digital currency such as the Digital Euro to strengthen payments infrastructure and strategic autonomy.