Economic Analysis

The ECB’s Governing Council meeting for September saw the central bank leave interest rates on hold for a second consecutive occasion. The deposit and refi rates were maintained at 2.00% and 2.15%, respectively. The ‘unchanged rates’ outcome was widely expected by markets. 

Manufacturing PMI stayed firmly in expansion mode at 53.2 in July, The services PMI eased further in July to 50.9, Core retail sales rose by 1.0% in the second quarter, Housing commencements 12 month running total back below 41k in June, House price annual inflation remained at +7.8% in June, CPI inflation rate fell to 1.7% in July. HICP rate remained at 1.6%, Goods exports up by 40.8% YTD in June, led by a sharp increase in pharma exports (+93.7%) and 12 month rolling Exchequer surplus narrowed to €13.5bn in July 

The Bank of England's Monetary Policy Committee (MPC) meeting for August saw the central bank cut the Bank Rate by 25bps to 4.00%. This represented the third 25bps rate reduction from the BoE this year, having previously cut in February and May. It also maintained the practice of easing policy at meetings that coincide with the publication of cycle, which began in August last year, the BoE has cut by a total of 125bps. 

The Federal Reserve Open Market Committee (FOMC) meeting for July saw the central bank, once again, leave policy on hold. The July FOMC outcome was very much in line with market expectations. However, unlike at the June meeting, the FOMC was not unanimous in its decision. Two FOMC members (Bowman and Waller) voted in favour of an immediate rate cut of 25bps. 

The Summer Economic Statement (SES) and National Development Plan (NDP) are key milestones towards Budget 2026. The SES sets out the fiscal boundaries of the Budget 2026 package to be announced in the autumn, while the NDP outlines the Government’s medium-term infrastructure priorities. 

Risk appetite improves following significant uncertainty/volatility in the aftermath of “Liberation day” However, there is still limited clarity on the ultimate landing zone for US tariffs. Market attention also focused on US fiscal & monetary policy, as well as geopolitical tensions Fed on hold for now. ECB near the end of its cutting cycle. BoE retains an easing bias. The dollar has weakened further in recent weeks. Euro likely to hold its gains, but high uncertainty still due to the evolving US policy landscape.

As we reach the halfway mark of 2025, the Irish residential property market continues to be defined by a shortfall in supply. The CSO completions data, which is the official measure of new supply indicate, a disappointing performance over the last year from the residential construction perspective.

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.