Central Bank of Ireland sets out how its economists are adapting models for security risks and higher defence spending

Central Bank of Ireland Governor Gabriel Makhlouf published a blog on the role of the economics profession during major upheaval, describing how the Bank’s research and analysis inform policy advice, monetary policy deliberations and its regulatory and supervisory work. He also set out how the Bank is adapting its analytical toolkit to reflect fast-moving geopolitical developments. The blog reiterates the Bank’s statutory requirement to provide analysis and comment to support national economic policy development, and describes an evidence-led research agenda aligned with its strategic themes and focused on areas of comparative advantage for Ireland within the Eurosystem. As an example of adapting to changing realities, Makhlouf points to model changes intended to capture how security concerns can affect economic decision-making as European defence spending plans evolve, noting NATO members’ agreement to spend 5% of GDP annually on defence-related expenditure by 2035. In an initial stylised exercise that assumes the spending increase is anticipated and proceeds as planned, the analysis suggests that cost pressures from a permanent reallocation of resources to defence do not necessarily show up in the consumer price index because defence output is purchased by governments and is not part of households’ consumption baskets. Makhlouf also highlighted the Bank’s research engagement programmes with external experts and said it expects to welcome a new cohort of participants later in 2026.