Economic Analysis

The global economy started 2026 on a strong footing. Indeed, US tariffs have not escalated to the extent expected post ‘Liberation Day’ in April 2025, and some measures were struck out, at least temporarily, by the US Supreme Court in early 2026. A key driver of this resilience has been the surge in AI-related investment, particularly in the US. 

The April policy setting meeting of the Bank of England’s Monetary Policy Committee (MPC) saw the central bank leave the Bank Rate unchanged today, at 3.75%. This represents the third successive meeting where the official rate has been left unaltered. This outcome was very much in line with market expectations. The most recent rate cut from the BoE occurred at its December meeting, when it lowered the Bank Rate by 25bps. This represented the fourth 25bps rate cut from the BoE last year. The BoE has lowered rates by 150bps in total since August 2024.

The third ECB Governing Council policy setting meeting of 2026 saw the central bank leave interest rates on hold. The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. This outcome was in line with market expectations, and marks the seventh consecutive meeting that the central bank has left its official rates unaltered. The market focus today was very much on any change to guidance following the surge in energy prices since the conflict in the Middle East broke out.

The April meeting of the Federal Reserve Open Market Committee (FOMC) saw the central bank leave interest rates unchanged. The target range for the Fed funds rate was maintained at 3.50–3.75%, for a third consecutive meeting. This outcome was very much in line with market expectations. Once again, Governor Miki Bowman was the sole dissenter, voting for a 25bps rate reduction.

The manu. PMI rose to 53.7 in Mar, amid solid gains in output, new orders, export orders and employment. Business expectations moderated for a second consecutive month Traditional industrial production stagnated in the 3 mths to Feb., but it was 3.1% lower YoY 

Foreign Currency and Interest Rates from 2025

The Irish residential property market remains defined by tight supply as 2025 draws to a close. However, over the course of the year, there have been some encouraging signs in the suppy dynamics, albeit the outlook remains challenging. 

This Budget is set against an uncertain economic backdrop so far this year. GDP growth was robust in the early part of the year but has since moderated. The Chancellor had committed to not raising taxes materially further following last year’s hikes to national insurance (NI) on employer contributions, which among other measures raised £40bn. While the tax rises are largely to fill the hole in the fiscal rules, there are also net spending increases in the budget