Economic Analysis

The second Federal Reserve meeting of 2026 saw the central bank leave interest rates unchanged. The target range for the Fed funds rate was left at 5.25–5.50%. The accompanying statement was largely unchanged from January’s edition, but the Fed did note that “recent geopolitical tensions, particularly in the Middle East”, could pose risks to the outlook.

The manu. PMI remained at 52.2 in Jan. amid a sustained, albeit slightly weaker rise in output and new orders. However, business expectations for the year ahead improved markedly Traditional industrial production stagnated in Q4, meaning it was 3.5% lower in YoY terms

Foreign Currency and Interest Rates from 2025

The second 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 sixth consecutive meeting that the central bank has left its official rates unaltered. In total, the central bank cut rates by 200bps during its easing cycle.

The second policy setting meeting of the year of the Bank of England’s Monetary Policy Committee (MPC), saw the central bank leave the Bank Rate unchanged today, at 3.75%.
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.

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. 

Global economy has proven to be robust over the past year despite ongoing geopolitical uncertainty, but risks still tilted to the downside. US growth increasingly imbalanced towards AI investment, with labour market weakening. Fed and Bank of England on hold at first meetings of the year, but set for further cuts while the ECB sits on the sidelines. Bank of Japan plotting further modest hikes. Dollar set for further modest weakening. Geopolitics, Fed independence and conditions in the labour market remain to the fore in 2026. Further modest upside for the euro, while sterling could remain on the defensive amid political uncertainty, and Bank of England policy easing.

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

The global economy entered 2025 in good shape, with indicators pointing to stronger growth in the Eurozone and UK, and continued robust, yet moderating growth in the US. However, the uncertainty created by the imposition of US trade tariffs, followed by partial 90-day delays, has created volatility in financial markets and concern in the real economy.